• Oil is firm in the open as market attention switches to the Fed. 
  • Bulls seeking to retest the multi-year highs. 

US West Texas Intermediate (WTI) is trading at $70.98 and within a range of $70.69 and $71.01 at the time of writing.

WTI is continuing to correct following the sell-off from a multi-year high scored on Friday after it closed out a third straight week of gains on an improved outlook for worldwide demand. 

On Friday, Brent crude futures settled at $72.69 a barrel, rising 17 cents after reaching their highest since May 2019. For the week, Brent was up 1%. WTI crude futures settled at $70.91 a barrel, up 62 cents. WTI was up 1.9% on the week. Spot ended 1% higher at $70.79, rising from a low of $69.70 to a high of $71.21.

The rollout of the vaccine in North America as well as Europe is helping to restore demand.  Also, news that OPEC+ will continue to take a very cautious approach, when introducing its sequestered supply into the market, along with continued predictions that global demand is on its way back, prompted money managers to increase WTI crude length, s analysts at TD Securities explained. 

''Resulting predictions of deficits in the second half of 2021 have sent prices to their highest in some three years, which convinced traders to cover their short exposure and to increase long holdings,'' the analysts added.

''However, with WTI trading at nearly $71/b, new supply from Iran, should the nuclear deal be made and sanctions lifted, may prevent specs from taking out new aggressive long exposure, which should limit any demand optimism driven rally.''

Meanwhile, there was a focus on the monthly report by the International Energy Agency (IEA) that said the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, would need to boost output to meet demand set to recover to pre-pandemic levels by the end of 2022.

"OPEC+ needs to open the taps to keep the world oil markets adequately supplied,’’ it said, adding, ‘’It said that rising demand and countries' short-term policies were at odds with the IEA's call to end new oil, gas and coal funding. "In 2022 there is scope for the 24-member OPEC+ group, led by Saudi Arabia and Russia, to ramp up crude supply by 1.4 million barrels per day (bpd) above its July 2021-March 2022 target," the IEA said also.

In other news, the number of oil rigs operating in the US rose by six this week, according to data compiled by energy-services firm Baker Hughes for its weekly report. It was the biggest weekly increase of oil rigs in a month.
 

WTI technical analysis

Technically, the price is correcting the bid and on the verge of a retest of the prior highs and a potential support structure on the 4-hour time frame. The correction is also on the verge of a 38.2% Fibonacci retracement that has a confluence with the structure near 70.60. This is guarding more downside 70 the figure where the 78.6% Fibo meets 4-hour structure. 

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