Crude Oil Price Update – Bullish Tone; Buyers Will Try to Drive Price thru $47.33 for Upside Breakout

September West Texas Intermediate crude oil futures are trading sharply higher after posting a potentially bullish closing price reversal bottom on Monday. Buyers extended yesterday’s gains after Saudi Arabia pledged to curb exports in August and OPEC called on several members to boost compliance with output cuts to help trim the supply glut and stabilize prices.

The bullish news was actually two-fold. Firstly, Saudi Energy Minister Khalid al-Falih said his country would limit its crude exports to 6.6 million bpd next month, almost 1 million bpd below levels a year ago. Secondly, Nigeria voluntarily agreed to join the deal by capping or cutting its output from 1.8 million bpd, once it stabilizes at that level.

Furthermore, Russian Energy Minister Alexander Novak said an additional 200,000 bpd of oil could be removed from the market if there is 100 percent compliance with the OPEC-led deal.

Technical Analysis

The main trend is up according to the daily swing chart. Taking out $47.74 will negate last Thursday’s closing price reversal top and signal a resumption of the uptrend. Today’s price action has made $45.40 a new minor bottom.

Today, the market is trading on the strong side of a short-term pivot at $46.57, making this level new support.

Yesterday, the market found support inside the intermediate-term retracement zone at $45.79 to $45.32.

On the upside, the key retracement zone and major upside target is $47.33 to $48.52. This zone provided resistance on July 5 when the rally stopped at $47.45 and on July 20 when the market topped at $47.74.

Forecast

Based on the current price at $47.07, the next upside objectives are $47.25 and $47.33. The support has been established at a price cluster at $46.58 to $46.57.

Overtaking $47.33 will signal the presence of buyers. This could trigger a rally into $47.74. Overtaking this top could fuel an acceleration into $48.52.

On the downside, a failure to hold $46.57 will indicate the selling is getting stronger. This could trigger an acceleration into $45.79.

As we approach the regular session opening, upside momentum is strong so I expect buyers to go after $47.25 and $47.33 shortly after the opening. Trader reaction to this area should determine the tone of the market the rest of the session.