Opening A Buy Signal in WTI Crude Oil

Crude Oil has been extremely bullish for about 19 months now, since it reversed from the grave in April last year. US WTI crude Oil has been climbing more than $120 without going through any in summer this year, as the global economy softened and China entered into another phase of coronavirus. But it doesn’t seem like we will see major restrictions in Europe and the US, which have turned the sentiment positive toward Oil.

The recent surge in energy prices have helped keep the sentiment bullish further for Oil. We have seen a normal bullish momentum in Gas and other energy prices, but the hype in the media and politics has been immense, making it seem like this would be the end of the fossil fuel, which has kept the sentiment positive in the industry.

Besides that, OPEC+ countries decided to increase the supply in summer, but the increase has been slow and this month it came below the quotas imposed. As my solleague Ash wrote earlier today “According to latest data from Reuters, OPEC’s oil output through the month of October came in below the planned levels on account of involuntary outages among some of the smaller oil producers in the group. Despite leading suppliers Saudi Arabia and Iraq pumping more oil, the total output from OPEC came in at 27.5 million bpd last month, 190k bpd higher than in September. However, the rate of increase was well below the proposed 254k bpd increase the group had previously agreed on.”

Buy stop order at the 20 SMA in WTI Oil

But, after such a run, there has been some exhaustion to the upside momentum but buyers are not exactly letting up either, keeping a defense at the recent lows around $80.79 last week before seizing back near-term control now on a push above its key hourly moving averages.

The $85 mark still poses a modest resistance point on the daily chart shown above, but the fundamentals continue to look solid for oil as we look towards next year. A Bloomberg report highlighted that China’s stockpiles are down to their lowest since February 2020 and that creates more headaches for local authorities who are already needing to deal with the power crunch amid shortages of coal and natural gas.

As such, that could see state enterprises come in to replenish inventories even as prices are at elevated levels i.e. underscoring added demand for crude stocks. OPEC+ will also be meeting later this week so there’s that to factor into consideration but I doubt the bloc will do much to shake up the status quo for the time being.

WTI