Oil has continued to tick higher this week with prices hitting their best levels in a fortnight. Front-month WTI briefly broke above $68 per barrel yesterday, and again this morning, before some profit-taking emerged to push prices back down.
Nevertheless, the daily MACD has begun to curl up off neutral levels suggesting the potential for further gains.
On the fundamental side, oil gapped lower at the start of this week after OPEC+ announced an output increase of 584,000 barrels per day (bpd) in August, way above the 411,000-bpd expected. But prices steadied on Monday morning and have continued to pick up since. There are several reasons for this.
Perhaps the main one came from the latest outlook from the Energy Information Administration (EIA). This forecasts a slowdown in US production this year as the downside pressure on oil prices has discouraged producers from increasing supply.
This is good news in a world where oil demand growth is slowing while supply remains plentiful. As is often said, the answer to low oil prices is low oil prices.
Source: TradingView
As the chart above shows, WTI has broken above the long term, downward-sloping trendline that has been building over the past three years. But as has been demonstrated on at least two occasions, rally attempts have been snuffed out quickly.
