Brent crude – Building momentum into resistance

Oil back in the groove?

Oil prices appear to have found a little bullish momentum again in the last few days, with the rallies we’ve seen in equity markets clearly a major factor. Another reported inventory build from API on Tuesday may have taken some of the gloss off the rally, which should make today’s EIA number all the more interesting, but momentum still looks very much with the bulls.

It now faces a big test around notable resistance though, just as momentum is building. Perhaps this is a bullish signal but so far, we’re yet to see a breakout. If price can break above $70 in Brent crude , then $71.50 would be the next notable resistance.

Brent Daily Chart

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In WTI, the notable levels are $63 in terms of resistance, with further resistance above potentially coming around $64.50-65.

WTI Daily Chart

We’ve very much seen oil prices benefit from stronger risk appetite this year and that again appears to be what we’re seeing this week. It also comes at a time when US output is stabilizing, oil rigs are on the decline and OPEC+ remains committed to output cuts. It’s been something of a reluctant rally over the last month or so but it appears to have gathered some momentum this week.

US Oil Production

Source – EIA

US Oil Rig Count

Source – Thomson Reuters Eikon

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.