Oil prices edged higher in early trade this morning.
Yesterday, front-month WTI broke above its first level of (mild) resistance which came in around $61.50 on a closing basis. It has yet to retest this area as support, and for now the short-term momentum is neutral.
The daily MACD continues to curl upwards from moderately oversold conditions. This suggests that oil could continue to rebound, with WTI having hit a multi-year low under $55 per barrel last week.
Source: TradingView
Adding to this possibility is the fact that investor sentiment towards energy, and oil in particular, remains extremely negative. While that would suggest continued downside pressure, it also means that should prices manage to spike higher, the likelihood is that they will take out stops on the buy side, thereby accelerating and extending an upside move.
In other words, it seems as if everyone is crowded on one side of the boat. And who can blame them? The fundamental picture continues to favour lower prices. Supply has been plentiful for months now, although the US has just announced fresh sanctions on Iranian production.
At the same time, OPEC+ has announced output cuts for Iraq and Kazakhstan, to compensate for the two countries breaking their quotas. Yet it was just a fortnight ago when OPEC+ said that it was raising production by 411,000 barrels per day from next month as it begins to unwind longstanding output cuts. This was well above market expectations.
Meanwhile, the International Energy Agency has once again downgraded its global demand growth estimates. So, it’s probably fair to hold off from any serious investment until there’s some further clarity, either through Trump’s tariffs, or through an improving technical picture.
