WTI crude – False hope for bulls?

Oil higher again but rally in doubt

We’re seeing a second day of gains in the oil market but I’m not getting too excited just yet. The market was feeling toppy prior to Friday’s sell-off, which was further highlighted by WTI making significant declines on a story that was nothing more than a slightly altered rehash of something we’ve heard numerous times before, without substance.

WTI Daily Chart

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We may be seeing some gains now but this currently looks like little more than a slight correction of Friday’s declines after price bounced off a key support zone. I wouldn’t be surprised to see this area come under pressure once again with today’s API inventory report – and the EIA report tomorrow – potentially providing the catalyst.

WTI has already run into some resistance around 64.50 which falls between the 50 and 61.8 fib level. While it is now off the daily lows, but that may not offer too much comfort to oil bulls.

WTI 4-Hour Chart

There have been a few interesting headlines today that may be contributing to the oil volatility, including a report that OPEC members subject to the output cut agreement have achieved 132% compliance (Reuters survey) vs 145% in March – this came just before the sell-off today – not to mention to headlines coming out of Venezuela which is another major oil producer, albeit one subject to sanctions that has significantly reduced its exports.

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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.