WTI Crude Oil Futures (NYMEX: CL) extended their winning streak for the fourth consecutive session, buoyed by renewed tensions in the Middle East. The primary catalyst remains the stalled ceasefire talks between Israel and Hamas, injecting supply disruption fears into the market. Despite Israeli Prime Minister Benjamin Netanyahu rejecting Hamas’ latest offer, US Secretary of State Antony Blinken hinted at room for negotiation, keeping some hope alive for a resolution. This geopolitical uncertainty adds a premium to crude prices, as potential disruptions in the region could significantly impact global supply.
Adding to the bullish sentiment, data revealed a larger-than-expected drawdown in US gasoline stocks, indicating robust demand. The Energy Information Administration (EIA) reported a 3.15 million barrel decline, exceeding analyst expectations. This signals healthy consumption in the world’s largest oil consumer, supporting prices. However, the EIA also reported a higher-than-anticipated crude oil stockpile build, which may temper the rally to some extent.
Furthermore, the projected slowdown in annual growth for the Permian shale basin, the largest US oilfield, is seen as positive for prices. This development suggests limited gains in US production, potentially tightening the supply-demand balance in the long run.
Technical
The 4-hour chart shows that crude oil’s current price of $74.13/BBL sits near the 50.00% Fibonacci retracement level, following a bullish breakout. Price action recently crossed above the 20-SMA (green line) but remains below the 50-SMA (blue line) and 100-SMA (orange line), indicating a short-term uptrend with potential for further upside.
The RSI indicator at 54.41 suggests some room for upward movement before reaching overbought territory. A sustained push above the 50.00% Fibonacci retracement level could open doors towards the 38.20% level ($75.47/BBL). A decisive break above $75.47/BBL could bring the 23.60% Fibonacci retracement level ($76.93/BLL) and $78.17/BBL resistance within reach in the near term.
However, should the 50.00% Fibonacci level hold firm as resistance, the 61.80% Fibonacci retracement level ($73.10/BBL) becomes the first line of support. A significant break below this level, accompanied by high volume, could confirm bearish momentum, potentially targeting the $71.42/BBL and $70.50/BBL support levels.
Summary
The ongoing conflict in the Middle East remains the dominant factor driving sentiment, with its potential to disrupt supply, keeping prices elevated. However, progress in ceasefire talks or alternative pathways to de-escalation could trigger corrections. The breakout above the 50.00% Fibonacci level suggests further upside potential, but resistance awaits.
Sources: TradingView, Trading Economics, Dow Jones Newswire, IEA, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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