The price of West Texas Intermediate oil has risen above the $60.00 benchmark level for the first-time since January 2020 today. The latest move higher in WTI oil has also helped to take-out a number of important long-term trendlines in the process.
Reports suggest this current move higher is being driven by tensions in the middle east. The ongoing war between Saudi Arabia and Yemen has seen an Iran-aligned Houthi group launch a drone strike towards the Kingdom of Saudi Arabia.
Saudi Arabia is one of the worst largest oil producers, so the oil market is particularly sensitive to developments which may cause oil disruptions in the Kingdom. Any direct strike on an oil facility in Saudi Arabia could cause oil prices to rally further.
The oil market is also being pressured by ongoing rumours from last Friday that OPEC is considering cutting its current production limits to reflect the ongoing rise in both WTI and Brent oil. If these rumours are confirmed we should expect more upside price pressure towards oil.
Other factors in play for oil include the deep freeze underway in the United States, which could provide further supply hurdles for crude. Stimulus from the Biden administration is also seen as a boon for the oil market.
Sticking with the consumption narrative, the ongoing vaccine roll-out is also seen as being bullish as it is hoped that most economies across the globe can get back to some normality if the mass vaccinations are proved to be successful.
Market sentiment towards WTI oil is very bullish at the moment, which could mean a short-term correction is on the cards. The ActivTrader Market Sentiment tool shows that some 79 percent of traders are bullish towards further gains in Crude oil.
WTI Oil Short-Term Technical Analysis
According to the four-hour time frame the MACD indicator shows that negative price divergence is present until the $59.30 level, which basically means that a pullback could happen at any time.
Traders should note that oil is looking fairly overextended at current levels, however, it does not mean that oil cannot continue to head higher as negative price divergence can take some time to unravel.
The Parabolic SAR indicator on the thirty-minute time frame highlights that traders need to hold price under the $57.50 level to increase short-term selling pressure.
Source By ActivTrader.
WTI Oil Medium-Term Technical Analysis
Looking at the daily time frame chart, a key long-term trendline, around $60.00 level has been broken. In theory, WTI has no meaningful resistance until the $68.00 level now that the trendline around the $60.00 level has been breached.
As you can imagine the Relative Strength Index is extremely overbought on the daily time frame. In fact, the RSI indicator is at its most overbought since 2018. This indicator may need to correct to neutral readings before WTI heads higher again.
Source By ActivTrader.