Oil Bounces Back
The recent sell off in oil proved to be short lived with the market bouncing sharply off the 65.52 level and rising trend line. Price has since moved back above the 69.53 level with RSI turning bullish and MACD close to crossing bullish again. The rebound in risk appetite has been a large driver of this move. Tonight’s FOMC event has the potential to further this move if USD trades lower on any disappointment.
Ahead of that event however, we also have the EAI inventories release. Following two months of straight weekly drawdowns, last week the EIA reported an unexpected build. This week, the market is looking for 2.6 million barrel draw. If this draw is confirmed or surpassed, we can expect the current rally to gain fresh momentum, taking price back up to challenge current highs. On the other hand, it would likely take a much large build than last week’s in order to affect a reversal lower.
With price sitting back above the 69.53 level, the focus remains on further upside in the near term with 74.46 and 76.78 the key upside targets. However, given the sell off from recent highs, caution is warranted here as there is still a risk of the market putting in a lower high, signalling the room for a continuation lower. Any break back below the 69.53 level will negate the bullish view.