WTI oil maintains positive tone and hit new marginally higher recovery high at $35.87 on Monday, after ending last week, the part of five-week steep recovery, with 6.2% gains.
Two key factors influence oil price these days. The first is fresh escalation of US /China tensions that kept traders cautious on possible China’s retaliation on US moves over Hong Kong and pressured oil prices.
On the other side, OPEC and Russia are moving closer to a compromise on extending existing 9.7 million bpd production cut for one to two months that inflates oil price and offsets for now stronger negative impact from escalating US/China conflict.
Daily chart shows that the price action was capped by falling 100DMA ($35.95) today, bullish momentum is fading after bearish divergence was formed and stochastic is about to enter overbought zone that together may slow recovery.
Bulls face headwinds from 100DMA and 50% retracement of $65.63/$6.52 fall and may enter consolidation before resuming towards $40 target.
Also, markets await releases of US crude inventories (Tuesday and Wednesday) as last week’s surprise increase in stockpiles had negative impact on oil price.
Rising 10DMA ($33.63) should ideally contain , but deeper dips towards key supports at $30.57 (daily cloud top) and $30 (psychological) cannot be ruled out.
Loss of $30.57/00 pivots would weaken near-term structure and risk deeper pullback.
Res: 35.95; 36.08; 40.00; 41.04
Sup: 34.25; 33.63; 32.34; 31.12
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