Brent & WTI Caught Between Supply & US Factors

BRENT & WTI CRUDE OIL ANALYSIS & TALKING POINTS

• More positivity around US debt ceiling could support crude oil.
• More Fed guidance to dictate prices today.
• More upside to come for Brent and WTI? Technical chart patterns favor bullish breakout.

BRENT/WTI CRUDE OIL FUNDAMENTAL BACKDROP

Crude oil prices (WTI and Brent) have rallied on the improved risk sentiment yesterday following on from relatively positive US debt ceiling negotiations. Despite a stronger U.S. dollar and a massive addition to weekly crude oil stocks via the EIA report, debt ceiling optimism has dominated other variables. From a supply chain perspective, fires in the Alberta region (Canada) have extended their devastation revising supply downward and bolstering crude oil prices.

Looking at the economic calendar today, US data has begun the trading day on the front foot with labor data (see below) significantly beating estimates on all metrics thus reinforcing the tight labor market in the US. The initial impact was a stark rally in the Dollar Index (DXY) resulting in a selloff in crude oil markets. The rest of the day will be dominated by Fed speak providing some short-term volatility for oil.

U.S. ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

BRENT CRUDE OIL PRICE CHART (DAILY)

Chart prepared by Warren Venketas, IG

Daily Brent crude oil price action is trading within an ascending triangle formation (black) with two unsuccessful attempts by bulls to pierce triangle resistance coinciding with the 77.23 March swing low.

Key resistance levels:

• 80.00
• 50-day MA (yellow)
• 77.23/Triangle Resistance

Key support levels:

WTI CRUDE OIL PRICE CHART (DAILY)

Chart prepared by Warren Venketas, IG

WTI crude oil is moving in a consolidatory fashion due to external global factors but resembles a short-term bull pennant that could supplement the upside pattern bias shown in Brent. Both crude oil charts are ripe for a breakout but caution is revealed on both Relative Strength Index (RSI) readings that hover near the midpoint 50 level.

Key resistance levels:

• 75.00/50-day MA (yellow)
• 72.50/Pennant resistance

Key support levels:

IG CLIENT SENTIMENT: MIXED

IGCS shows retail traders are NET LONG on crude oil, with 76% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we arrive at a short-term cautious disposition.

Contact and followWarrenon Twitter:@WVenketas