The West Texas Intermediate Crude Oil market has recaptured all of the losses from the horrific selling on Monday, which is a bit surprising considering that its 8% loss is very rarely a short-term occurrence or a “one-off”. That being said, we now have recaptured the 50 day EMA which is also worth paying attention to, as technical traders will pay close attention to it.
However, one thing that need to pay close attention to is that we had such a horrific selloff that I still think there is going to be a bit of resistance above. That resistance is something that a lot of traders will be looking at, as there is so much in the way of noise just above and of course it was the beginning of the overall selling. Remember, there are a lot of concerns when it comes to the Delta variant, and of course whether or not the demand is going to continue climbing. There is the narrative that perhaps the global economy will continue to demand crude oil, at elevated levels now that there are reopening. However, we have also recently seen a lot of closings as well, so I think the picture is a bit more convoluted than most traders would like.
OPEC+ has finally come to an agreement on producing oil, and therefore that helps the idea of stability, at least in the sense that we will not have “renegade countries” out there pumping as much crude into the market as they possibly can. Because of this, oil rallied but at the end of the day it is worth noting that inventories in the United States continue to climb, which is not the vote of confidence a lot of traders will be looking for. It is only a matter of time before crude oil pulls back. We may have a short-term rally at this point, but the next five dollars is going to be very difficult to overcome, as there is so much in the way of noisy behavior. Ultimately, this is a market that continues to see choppy behavior more than anything else, but just as we had been oversold on Monday, we are probably overbought at this point over the short term.
