- Price breaks higher after brief consolidation
- Oil market remains tight, supporting prices
- Momentum indicators may be key near $100
After a week of consolidation, oil prices are on the rise again on Wednesday ahead of the release of inventory data from EIA.
The API release yesterday may have surprised some, recording an increase of 1.586 million barrels, a lot more than the 0.7 million decline that’s expected today.
But it won’t alter the view that the market is extremely tight following a number of supply cuts from OPEC+ countries. I think what we’ve seen over the last week or so is a little profit-taking and the fact it’s already on the march higher is potentially a sign of how bullish traders still are.
How much higher can oil prices go?
After a week or so of consolidation, Brent crude has broken higher again following a move above the top of the bullish flag formation.
Source – OANDA on Trading View
Naturally, the move has got people talking about $100 oil again, whether it will happen and if so, how much further it will go. While multiple factors will feed into the latter, the question of whether it will reach the level may become clearer quite soon.
This is a major psychological level and it proved to be so the last time it traded here almost a year ago. On that occasion, the price briefly pierced the level in early November but failed to make a sustainable and substantial move above.
It will be interesting this time to see how the momentum indicators – on this chart the MACD and stochastic – behave now that the price has broken higher. A divergence may suggest the price could struggle the closer it gets while fresh highs alongside price could be a bullish signal.
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