Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
WTI Crude Oil (NYMEX: CL) has surged to a 13-month high, with WTI reaching $94.43 per barrel (/BLL). The primary driver of this bullish momentum is mounting concerns over supply constraints. One critical factor contributing to this bullish sentiment is the tightening inventories at Cushing, Oklahoma, a crucial storage hub for WTI crude. Oil stockpiles at Cushing have fallen below 22 million barrels, marking their lowest level since July 2022 and nearing minimum operating levels. This decline in US oil stockpiles underscores the impact of OPEC+ supply cuts on global oil stockpiles.
OPEC+ major producers, including Saudi Arabia and Russia, have extended their supply cuts through the end of the year, further tightening global supply. Additionally, the Russian government’s consideration of restricting grey fuel exports and raising fuel export duties has added to supply concerns.
Technical Analysis
On the 4-hour chart, WTI crude oil is currently priced at $94.11/BLL. Price action comfortably resides above the daily pivot point at $92.76/BLL, signifying bullish strength. The 20-EMA (green line), 50-EMA (blue line), and 100-EMA (red line) all trend upward, with the 20-EMA leading the way.
However, traders should exercise caution as the RSI is in overbought territory, with a reading of 70.81 and the RSI-based moving average at 61.48. These indicators suggest a potential for a short-term pullback or consolidation.
Short-term trading opportunities may exist towards the resistance around the psychological level of $95.00/BLL if the bulls maintain their upward momentum. Breaking above this initial resistance could bring the $95.78/BLL and $96.50/BLL resistance levels into play.
On the downside, if the bullish momentum falters, the support around the $93.62/BLL level could act as a level of interest in the short term. A break below this support would leave the $92.48/BLL and $91.04/BLL price levels to provide significant support in the short term.
Summary
Oil prices have reached a 13-month high due to supply concerns and tightening inventories at Cushing, Oklahoma. While the 4-hour chart signals bullish strength, traders should be mindful of potential short-term pullbacks, especially given the overbought RSI readings.
Therefore, short-term trading opportunities exist on both the upside and downside, depending on price action around key resistance and support levels.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, MT Newswire.
