Crude Oil Price Update – Holding Above $48.52 Will Indicate the Presence of Strong Buyers

September West Texas Intermediate crude oil futures reached an 8-week high on Thursday, closing higher for a fourth straight session. Support continued to be provided by last week’s huge inventory draw down as reported in Tuesday’s American Petroleum Institute’s report and Wednesday’s U.S. Energy Information Administration’s inventories report. Buyers also like Saudi Arabia’s plan to cut exports.

In other news, U.S. shale producers including Hess Corp., Anadarko Petroleum and Whiting Petroleum this week announced plans to cut spending this year as a result of low oil prices.

Skeptics are saying, however, that the upside may be limited because the recent surge in prices may actually encourage more output, particularly from U.S. shale producers with low costs.

Technical Analysis

The main trend is up according to the daily swing chart.

The main range is $52.38 to $42.27. Its retracement zone is $47.33 to $48.52. Closing above this zone on Thursday is contributing to the upside bias.

The next major target on the upside is the main top at $52.38. The trend will change to down on a move through $45.40.

The key to extending the move will be sustaining the rally on the strong side of the retracement zone.

The key to sustaining the strong momentum will be holding above the steep up trending angle moving at a pace of $1.00 per day from the $45.40 main bottom. It came in at $48.40 on Thursday and moves up to $49.40 on Friday.

Of course, taking out the next downtrending angle at $49.69 will also be a sign that the buying is getting stronger.

For longer-term investors, a break back under the Fibonacci level at $48.52 will be the first sign of weakness while a sustained move under the 50% level at $47.33 will be a strong indication that the rally is over.