U.S. benchmark WTI and international benchmark Brent crude oil futures are edging higher early Friday after taking out last week’s high. The rally is helping to put the markets in a position to post their fourth straight monthly gain.
The catalyst behind today’s earlier rally is another tanker attack in the Strait of Hormuz. The event and the reaction by traders highlight the persistent supply risks in the region.
Peace Talk Has Yet to Change the Trade
Up until today, the price action was mixed-to-lower this week. The attack on a Saudi refinery may have underpinned the market, but gains were capped all week by the prospect of a possible peace deal because of reported meetings between several countries and Iran.
Today’s price action suggests that traders are more than willing to drive the risk premium higher if they have a valid reason to, regardless of whether there are behind-the-scenes talks going on. In my opinion, it’s also another sign that it may be easier to buy even at these lofty price levels than it is to sell against the major uptrend.
Physical Supply Risks Keep Buyers Interested
The price action also indicates that supply and supply-related risks are at the forefront. It starts with key factors like Cushing inventories falling to their lowest level since December 2024 and SPR inventories sitting at their lowest level since October 1982.
Additional bullish factors include lower Hormuz flows, attacks on Saudi Arabian refineries and low distillate levels. All of these factors may be overwhelming any peace attempts that have not provided a single shred of evidence that a credible deal to end the war is in the works, that Hormuz flows are ready to recover, or anything else that bullish traders can overcome with a single attack on a refinery or tanker.
Brent Oil Price Forecast
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See all Brent Oil forecastsHigh Prices Keep the Market Vulnerable
The fundamentals and technicals remain bullish, but prices are high and buying may be getting a little cautious. Nonetheless, this market will be vulnerable to spikes in either direction if the attacks escalate and supply falls, or if there is true evidence of a peace deal.
Daily December WTI Crude Oil Technical Analysis
December WTI crude oil futures are trading higher in the overnight session on Friday. The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session with a breakout over last week’s swing top at $103.92. The move took the market to $104.99 before it pulled back. A trade through $86.00 will change the main trend to down.
The minor trend is also up. A trade through $95.25 will change the minor trend to down. This could shift momentum to the downside.
The minor range is $95.25 to $104.99. Its retracement zone at $100.12 to $98.97 is potential support.
The main range is $86.00 to $104.99. Its retracement zone target is $95.50 to $93.25.
The major support and trend indicator is the 50-day moving average at $91.04.
Daily December Brent Crude Oil Futures Technical Analysis
On the last day of trading, December Brent Crude Oil futures are sharply higher after hitting a new contract high at $117.84 earlier in the session. The main trend is up according to the daily swing chart. Today’s earlier move reaffirmed the uptrend. A trade through $95.12 will change the main trend to down.
The minor trend is also up. A trade through $105.95 will change the minor trend to down and could shift momentum to the downside.
The minor range is $105.95 to $117.84. Its retracement zone at $111.90 to $110.49 is the first support zone. The main range is $93.68 to $117.84. Its retracement zone support is $105.76 to $102.91.
These support zones are followed by the 50-day moving average at $100.81. It is both major support and an important trend indicator.
What to Watch
December WTI Crude Oil Futures
Friday’s early surge to $104.99 reinforced my bullish outlook. The pullback after the breakout suggests buyers are cautiously bullish. Overcoming $104.99 later in the session will reinforce my bullish belief. A sustained move over $104.99 will put a pair of main tops at $106.75 and $107.77 on the radar.
A breakdown under $102.00 will turn the market lower for the day, putting the market in a position to post a potentially bearish closing price reversal top.
More importantly, a close under $103.27 will form a weekly closing price reversal top. That signal could turn into a major development if it’s confirmed next week.
December Brent Crude Oil Futures
Today’s earlier breakout reaffirmed my commitment to the upside. Follow-through buying through $117.84 could extend the rally into the next main top at $119.50. This is a potential trigger point for an acceleration to the upside with $126.41 the next potential target.
Thursday’s close at $114.88 will be important support late in the session. A close below it will produce a daily closing price reversal top. This could trigger the start of a short-term correction if confirmed.
The most important level to watch late in the session, however, may be last week’s close at $116.72. A close below this price could form a potentially bearish weekly closing price reversal top. If confirmed next week, it could lead to a two-to-three-week correction.
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