Oil’s Key Talking Points: Oil is approaching $75 per barrel in an attempt to break above the ascending channel pattern. Further gain is supported by momentum indicators. The last time I got down to write an oil quarterly forecast, we were dealing with a third wave of Covid-19, with new infections spreading uncontrollably throughout the globe, making the prognosis for oil demand very bleak. Following a cyclical trend from prior years, the technical picture was also displaying signals of weakness, therefore I expected prices to fall lower before recovering. That hasn’t been the case in the past. Despite having seen one of the deadliest bouts of Covid in the last year, oil prices began to recover sooner than expected, and by April, were trading above $65 a barrel, and have been gradually rising since then. Looking ahead to the third quarter, the underlying outlook is undeniably optimistic. With economies reopening and investors insuring against inflation, there appears to be just one direction for oil prices right now: up. And, at least on the short-term chart, there appears to be no way to deny it from a technical position. Crude prices have been demonstrating a persistent trend of rising lows and highs since the end of March, forming a strong ascending channel pattern. The important moving averages are exhibiting bullish momentum, and the MACD is in positive territory on the daily chart. In the short term, the stochastic oscillator is sinking slightly from overbought circumstances, allowing for more bullish momentum to consolidate. WTI crude has lots of leeway to fall within its range without jeopardizing trendline support, therefore the prognosis is still optimistic.
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WTI Crude Daily Chart (December 2020 – June 2021)
WTI crude was last at current levels (73.50) in October 2018, according to the weekly chart. The previous high was $76.82, but I expect prices to rise to this level in Q3. To view price activity above $100 per barrel, we must look back to June 2014, which appears to be the price objectives most experts are expecting at this stage. Weekly WTI Crude Oil Chart (May 2011 – June 2021) Before we get there, there are a few key locations to keep an eye on, with the $77.80 level being one of them, considering the opposing price pressures since 2011, as well as its proximity to the 2018 top. There’s also the $95 region, where there’s been a lot of price convergence in the past, so this might be a consolidation zone before a bigger move to $100. Download our free 3Q trading advice from the DailyFX Free Trading Guides to see the full Oil forecast, including the fundamental view! —- Market Analyst Daniela Sabin Hathorn contributed to this article. Daniela can be found on Twitter as @HathornSabin./n
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