WTI: Bulls hold reins near 7-week top amid commodity rally

  • Greenback decline pleases commodity buyers including WTI.
  • Supply crunch, geopolitical tension offer additional strength to the upside momentum.
  • Baker Hughes Oil Rig Counts and China trade data awaited for fresh direction.

Despite having fewer fresh catalysts to follow, WTI remains on the bids near 7-week tops as it trades at $60.50 ahead of the Europe market’s open on Friday.

Overall commodity basket run-up on the back of the US Dollar (USD) weakness can be spotted as a reason for the energy benchmark’s latest strength. Adding to the momentum could be the likely UK-Iran tension after the British oil tanker was stopped by Iranian guards in the Persian Gulf. On the background, supply cut extension by the Organization of the Petroleum Exporting Countries (OPEC), Russia and some other non-OPEC oil producers, jointly called as OPEC+, continue to flash output crunch worries.

The USD has recently been under pressure after the US Federal Reserve officials openly favor Fed rate cuts while citing downside risks to the inflation expectations.

Commodities have an inverse relationship with the USD and hence a decline in the greenback can well be witnessed by an uptick in commodity basket.

Against the move is the US-China trade stalemate that raises the doubts over the future energy demand.

Moving on, monthly trade balance data from China and weekly release of the Baker Hughes US Oil Rig Counts will be on the black gold traders’ radar. While China data is expected to portray an improvement in trade balance and may escalate the present oil run-up, further fall in the US oil rig counts from 788 prior can offer an additional reason to the bulls.

Technical Analysis

FXStreet Analyst Ross J Burland spots convergence of daily moving average to cite $57.80 as the key support:

Bulls continue to commit and the price drifts higher on the 60 handle. On the downside, the familiar  20, 50 and 200 Experiential Moving Averages fall in line as potential support around 57.80. Then, below the weekly lows at 56.77, the 52 handle and then the 14th Jan 50.41 lows ahead of the 26th November lows at 49.44 are a target.

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