Looking to the Futures Crude Prices Hold at Four Month Hight.

September Crude Oil futures have continued their impressive price rebound reaching 4 ½ month highs this week.
The energy sector has seen a remarkable recovery after the COVID-19 carnage witnessed in March and April. Prices have nearly doubled from the lows with the lead September contract (CLU20) climbing above the $40 mark. Volatility has subsided significantly as prices have held in relatively tight ranges as the trade weighs conflicting headlines.
The optimism from last month that the pandemic appeared to be easing and economies were slowly reopening had fed the price recovery. However, those hopes of a return to energy demand have been tempered of late with the marked resurgence of new virus cases, particularly in the Unites States. Fears that many regions would go back to lockdown status has been looming over the market. But the market has shown impressive resilience, holding and even adding to recent gains. A number of factors have contributed to the bull camps confidence. First, Crude has seen a boost as the U.S. Dollar has continued its tailspin dropping to 4-month lows this week.
In addition, the European Union concluded a 4-day meeting earlier this week passing a 750 billion-euro stimulus package to counter the region’s pandemic-induced economic slowdown. Spillover bullish sentiment continues to emanate from equity markets that continue to buck any bad news and focus on an expected recovery. Feel-good news bytes of positive vaccine trials and additional stimulus to come here at home have added to the optimism.
The market was able to shake off some poorer than expected weekly stocks data this week as well. Tuesday afternoon’s American Petroleum Institute (API) release pegged a surprise build of 7.54 million bbl versus trade expectations of a 2.0 million bbl drawdown. That shocker was followed with yesterday’s Energy Information Administration data that showed an equally unexpected build in stocks. Crude inventories were expected to show a 2.0 million bbl draw but came in with an actual 4.89 million bbl build. Distillates also disappointed with supplies rising 1.07 million bbl with the trade looking for a draw instead. Gasoline stocks did drop 1.8 million bbl, slightly above expectations.
Lurking in the background has been the simmering trade issues between the U.S. and China. The recent skirmish of rhetoric between the world’s two largest trading partners as spilled over into more worrying developments. The U.S. this week demanded that China close its consulate in Houston to guard against theft of intellectual property. The Chinese responded back stating if the U.S. doesn’t revoke the order they would respond with “firm countermeasures.” Any resumption of a U.S./China trade dispute would hurt energy prices.
Technicals
The September WTI contract (CLU20) has climbed to a 4 ½ month high holding gains above the $40 mark. The gap created by the early March price plunge was filled at the 42.50 level Tuesday. Next resistance is waiting at the 200-day moving average crossing today at the 44.41 mark today. Beyond the 48.97 level offers the next resistance. Pullbacks will find support at Monday’s 39.97 low, followed by the 38.77 and 37.32 marks. Longer-term support comes in at the bottom of the current $7 wide channel established since the end of May at the $35 mark. The 14-day RSI is sitting at 61 and bears watching for overbought conditions developing.
 20-Day SMA     40.53
 50-Day SMA     38.02
 200-Day SMA   44.41
 14-Day RSI        61.05%
 Implied Vol       37.00%

Contract Specs (CLU20)


CME NYMEX WTI Crude Oil futures trade on your StreetSmart Central platform.

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