Oil Prices Jump as Crude Clings on to Technical Support
OIL PRICE OUTLOOK – TALKING POINTS
- Crude oil prices rose over 1 percent following reports of ‘drone terrorism’ against pipeline infrastructure in Saudi Arabia
- Geopolitical risk and seasonal demand factors are helping offset bearish headwinds brewing from US China Trade War rhetoric
- Oil outlook appears more sanguine if prices can hold technical support above $60/bbl
- Don’t miss out on the free DailyFX Q2 Oil Forecast for in-depth analysis
Crude prices soared roughly 1.2 percent to $61.54/bbl during Tuesday’s trading session in response to the latest geopolitical outburst impacting the oil market. Saudi Arabia’s Energy Minister Khalid al-Falih stated earlier that an “act of terrorism” was carried out on two of the country’s major oil pipelines. The report quoted Saudi’s al-Falih as saying that the attack targeted the UAE and “the security of world oil supplies and the global economy.”
CRUDE OIL PRICE CHART: DAILY TIME FRAME (SEPTEMBER 26, 2018 TO MAY 14, 2019)
Today’s gains have helped offset a string of losses as fears over increasing oil output coupled with diminishing hopes that a US China trade deal will be reached. But, crude oil prices still remain above technical support at the 50.0 percent retracement level around $60.00/bbl drawn from October’s peak and December’s bottom last year.
Positive sentiment from a technical perspective has waned, however, after bullish uptrend support from the latest 40-plus percent rally was broken earlier this month. Now, a short-term bearish downtrend has formed while a downward-sloping 34-day EMA both look to serve as headwinds to further upside in oil prices.
CRUDE OIL PRICE CHART: 4-HOUR TIME FRAME (APRIL 22, 2019 TO MAY 14, 2019)
Focusing in on a closer perspective, it appears that the 78.6 percent Fibonacci retracement level drawn from the high and low recorded on April 23 and May 6 respectively serves as a new area of confluence around the $61.50/bbl price. Oil bulls will likely watch this level closely to see if technical support continues to hold with the 61.8 percent and 50.0 percent Fibs encompassing the $62.50-63.20/bbl price level eyed as short-term upside targets. Although, if prices fail to hold footing above $60.00/bbl, crude could quickly accelerate to the downside.
- Written by Rich Dvorak, Junior Analyst for DailyFX
- Follow @RichDvorakFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.