US Oil rallying into ten-month highs, WTI knocking on the ceiling near $90.00

West Texas Intermediate (WTI) crude oil is on the high side for Thursday, chalking in a new ten-month high as US light sweet crude takes a run up the charts with eyes on $90.00 per barrel.

OPEC warns that supply constraints could run deeper, longer than previously anticipated

The International Energy Agency (IEA) flashed a warning on Wednesday that crude oil production cuts from member countries of the Organization of the Petroleum Exporting Countries (OPEC), specifically those from Saudi Arabia and Russia, will lead to a “significant supply shortfall” that would send oil prices soaring in the coming months.

Oil production cuts across OPEC, specifically Saudi Arabia’s million-barrel-per-day production squeeze, alongside Russia’s 300,000 bpd pumping cut, are sending oil prices soaring. Saudi Arabia and Russia recently extended their production cuts through December, and the IEA is warning that the continued production declines will produce a significant supply constraint through the fourth quarter.

Saudi Arabia and Russia both announced that the extreme production cuts were extended through the end of the year “with the aim of supporting the stability and balance of oil markets”. WTI oil prices are up nearly 40% from May’s lows near $64.00/bbl.

When factoring in all oil production cuts across OPEC, the global oil market is undersupplied by an estimated 1 - 3 million barrels per day. Global oil reserves are broadly expected to draw down to a fraction of their current holdings, including the US’ Strategic Petroleum Reserve (SPR).

WTI technical outlook

WTI crude oil is stretched all the way to the top, trading well above all relevant intraday technicals. The 100-day Simple Moving Average (SMA) is swamped near the $76.00 level, while the 50-day SMA has turned aggressively bullish and pushing into the $81.00 mark.

The nearest technical floor is priced in near August’s swing high at the $84.00 handle, a level that WTI previously challenged back in April of this year. 

If bullish momentum continues, the nearest technical ceiling will be the highs marked in near $92.50 back in October of 2022, while any bearish reversals will see rising support from a bullish trendline marked in from June’s lows near $68.00.

WTI daily chart

WTI technical levels