Crude Oil, WTI, Omicron Variant, Technical Analysis - Talking Points:
- Crude oil prices continue climbing out of a bear market on Wednesday
- Pfizer vaccine study on Omicron neutralization boosted market mood
- WTI faces key resistance as positioning signals offer a bullish outlook
WTI crude oil prices climbed over the past 24 hours, extending gains from the end of last week. The commodity has climbed out of a bear market, defined by a market correction in excess of 20%. Oil is now down about 15% from October’s peak. The growth-linked commodity was likely supported by general market sentiment and ongoing updates about the Omicron Covid-19 variant.
Reports crossed the wires from Pfizer and BioNTech that early lab studies showed that a third dose of their vaccine neutralizes the new variant. They also announced that a variant-specific dose could be made available around March 2022. This bodes well for WTI, which was suffering in November when the Omicron variant dented global growth estimates. Stocks on Wall Street closed mostly in the green.
This could leave the commodity on the offensive ahead of Friday’s US CPI report, where headline inflation is expected at 6.8% y/y for November. This would be up from 6.2% as the Federal Reserve looks into perhaps increasing the pace of tapering asset purchases. In the interim, WTI may see volatility around US initial jobless claims. Improving labor market conditions may offer more support to the commodity.
Crude Oil Technical Analysis
WTI crude oil is sitting right under key resistance around 72.90 on the 4-hour chart below. Prices have been consolidating just under this price, and negative RSI divergence has emerged. On the other hand, a bullish crossover between the 20- and 50-period Simple Moving Averages hints at an underlying bullish bias for the short term. This is as WTI faces a falling trendline from early November. A breakout above immediate resistance may open the door to extending the early December bounce.
WTI 4-Hour Chart
Chart Created Using TradingView
Oil Sentiment Analysis - Bullish
According to IG Client Sentiment (IGCS), about 71% of retail traders are net-long crude oil. IGCS tends to be a contrarian indicator, since most investors are bullish, this suggests that prices may fall. However, short positioning increased by 6.43% and 10.93% over a daily and weekly basis respectively. The latter hints that the price trend may soon reverse higher despite overall positioning.
*IGCS chart used from December 9th report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
