West Texas Crude Above $100; Outlook

by on December 27, 2013 4:49 pm GMT

Economic optimism has been strengthening West Texas Intermediate (WTI) crude along with the fourth consecutive week of inventory depletion. The Energy Information Administration (EIA) reported weekly inventories dropping 4.7 million barrels which far exceeded the forecast of a 1.9 million barrel shortage. A large part of the inventory decline is due to refineries operating at higher rates, and this is calling for increased demand of crude.

“Most of the economic news has been pretty good lately and that’s giving a boost to oil,” said Michael Lynch, president of Strategic Energy & Economic Research.

Crude futures is up over a percent in today’s session after the inventory report and trading at $100.55 per barrel. The daily chart has been rather clear in showing trend, and price action has follow Fibonacci levels quite well.

Price action bounced off the 23.6 level while creating a low and been up ever since. Once price action breaks through to a new level, crude has bounced around prior to breaking through current levels, or the 50 percent retracement level from the yearly low-to-high.

The momentum is strong with the +DMI moving upwards concurrently with the ADX.

Price action support will be found at $99.66 before reaching secondary support at the 50 percent retracement at $99.07. Crude has a shot of reaching $102.18, but resistance at $101.03 will have to be overtaken.

Look for crude to trending upwards with positive economic data and inventories continuing to work in crude’s favor. The black gold is up over $4 in less than two weeks, so a pullback to support levels are likely. However, in the near-term crude is bullish.

There are two bullish EMA convergences looking to take place: 20/50 EMA and 72/200 EMA crossover. This should give crude a boost, technically.

1D Chart of QM

1D Chart of QM

The weekly chart is showing  bullish potential and could stoke a larger, long-term move as long as crude remains on its current path. Price action broke the 61.8 percent Fib. level and could make its way to $104.287. However, resistance is still present just above $101 per barrel.

The ADX is sloping down, however. There is a bullish DMI crossover in the works, and this could provide further movement to push beyond $101 per barrel.

WK Chart of QM

WK Chart of QM