Crude oil analysis: WTI path of least resistance to upside

The price of oil is pushing higher again as you would expect with the current situation. In this crude oil analysis, I will highlight the key factors pushing prices and levels to watch on WTI.

Crude oil analysis: Can’t see how prices can fall given current situation

Crude oil prices continue to press higher amid the ongoing standoff between the US and Iran. While the softness in US and Chinese data of late does point to some moderation in demand, oil prices remain predominately supply-driven. Crude oil is largely demand inelastic anyway, meaning buying stays strong when prices go up and down. Demand only gets destructed when prices go up by significant amounts and stay elevated. I am not sure the current prices of around $85-$95 fits that bill. Unless the strait of Hormuz re-opens, I just can’t see how oil prices will fall back meaningfully in the near-term.

Technical crude oil analysis: WTI levels to watch

The trend is certainly bullish on oil prices right now, regardless of the timeframe. The hourly chart here shows a bullish trend line connecting the recent lows. Shallow dips, followed by short periods of consolidation and then the inevitable break to the upside. Resistance after resistance levels have broken. Today it was the $85 level that had offered some resistance, but at the time of writing, WTI was starting to climb above this level too. Let’s see if it will soon run into some offers. Even so, the downside should be limited given the macro backdrop.

Anyway, support below $85.00 sits around $84.00 and then $83.60 on the oil price chart. If the latter breaks then we could see a potential dip to near the point of origin of this week’s breakout around $82.00 area.

On the upside, the next potential target is the liquidity above the 31^st July high of $86.00, followed by the next round handles of $87.00 and $88.00, before the focus turns to the next psychological level of $90.00.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R