Crude oil prices extended gains for the week by as they target the 3rd straight winning session on the back of increased risk appetite and US Dollar weakness. Brent crude oil price is up 13.12% as at the time of writing, slightly off intraday highs that were posted at $26.97 as crude oil benefitted from an appetite for commodities, which has seen safe-haven demand weaken and last week’s demand for the US Dollar taper off.
The rise in crude oil price comes as countries continue to look for new storage outlets amid the global glut, with Oman alerting its crude oil customers that it would reduce their July allocations by 30%. A Reuters report also indicates that the US President may have pressured Saudi Arabia into initiating production cuts earlier in the month.
The production cuts agreed to by the OPEC + alliance are set to kick in tomorrow, and this may be the tonic to bring much-needed relief to the crude oil markets as downside pressures from heavily reduced demand continue to subsist.
Today’s upside move extends the breakout attempts from the falling wedge pattern, with a daily close above the wedge’s upper border and the 22.35 resistance (November 2002 lows) confirming the breakout. Today’s move has also surged above the 24.68 resistance, although a push towards 28.38 seems to have faltered.
Price needs to stay above 24.68 on two successive daily trading sessions to confirm a break above this level. The expected short-term impact of the production cuts may also help drive prices towards the 28.38 resistance. Above this level, 31.69 and 35.61 continue to hold promise as future resistance targets.
On the flip side, if the price fails to hold above 24.68, then a retest of the 22.35 price level is likely. Further downside targets at 16.59 and 1998 lows at 9.66 could also come into the picture if demand and storage concerns continue to plague the market.