Like many other commodities yesterday, December oil futures traded in a narrow range, drifting back and forth and lacking both energy and direction, with the WTI contract closing the oil trading session at $92.42 per barrel and only marginally higher on the day. This has been the feature for crude oil this week which has remained waterlogged in this region, bounded by the pivots below in the $88 to $89 per barrel region, and $93.50 per barrel to the upside. However, to gain an insight into where crude oil prices are heading next we need to consider the associated volume on the daily chart and in particular the strong green volume bars of the last few days, suggesting that the market is preparing for a breakout from this narrow range.
This view is further confirmed by the daily trend with the recent bearish trend dots having now flattened and subsequently changed to white, as the market moves into congestion, and with the pivots rising below, these are also suggesting a breakout to the upside, and a possible run back to test the $100 per barrel level in due course.
Moving to the three day chart, the volume he remains firmly bullish, supporting the return of buying on the daily chart. However, for a resumption of the longer term bullish trend we need to see the three day trend revert to green and away from the current white trend dots which have been a feature of the slower trend since late September.
From a technical perspective, the key price level remains the psychological $100 per barrel level, and should this be breached in the medium term, then we can expect to see an extended run higher for oil prices in due course.
By Anna Coulling