Crude oil continues to trade in a narrow range moving back and forth between the $91.50 per barrel region to the down side, and $97.50 per barrel to the up side, and with bullish sentiment in the ascendancy in the last few days, the commodity appears to be preparing for a re-test of this key level as shown with the green dotted line. Whilst Thursday and Friday last week closed with wide spread up candles, and associated high and rising volume, a positive signal, today’s trading has been muted, reflecting the broader markets in general, and as I have highlighted with other commodities, the once reliable relationship with the US dollar, appears to have disconnected for the time being. Indeed the USD index has been trading lower in today’s session with oil also lower, as it struggles to break above the $96 per barrel level. It was also interesting to note in last week’s oil stats, that even a big draw of -6.3m bbls had little to no effect, and failed to inject any momentum into the commodity. Bear in mind that this was against a forecast of -0.8m bbls, so a big difference.
From a technical perspective there are now two key areas in place. The first is the $97.50 per barrel price level, which is key, and for any extended phase of bullish momentum has to be breached at some point, before preparing for any move beyond $100 per barrel. The other area is on the volume on price chart. Here we have deep area of price support now in place which extends from $92.50 to $94.00 per barrel, with secondary support above. So a strong platform now in place for oil. However, any move higher has to be supported with strong and rising volume. The buyers are there, but withdraw each time the market approaches the $97.50 per barrel area. Perhaps next time, we will see that breakout on high volume!
By Anna Coulling