Crude Oil Price Update – Labor Strike, Political Unrest Fanning Tight Supply Concerns
U.S. West Texas Intermediate crude oil futures are inching higher on Tuesday amid increasing worries about tight supply. Fanning these concerns are a labor strike in Norway and political unrest in Libya.
On Tuesday, Norwegian offshore workers began a strike that will reduce oil and gas output, the union leading the industrial action told Reuters.
Meanwhile, Libya faces further supply disruptions due to escalating political unrest, making the likelihood of OPEC meeting its newly increased production quota even more unlikely, said ANZ Research analysts in a note.
In other supportive news, OPEC is having a hard time meeting its agreed output production levels. Output from the 10 members of OPEC in June fell 100,000 barrels per day (bpd) to 28.52 million bpd, off their pledged increase of about 275,000 bpd, a Reuters survey showed.
Trader reaction to the short-term 50% level at $111.21 is likely to determine the early direction of the August WTI crude oil market on Tuesday.
A sustained move over $111.21 will indicate the presence of buyers. If this move generates enough upside momentum then look for a surge into the short-term Fibonacci level at $113.49, followed by the main top at $114.05.
Taking out $114.05 will reaffirm the uptrend with a minor top at $116.58 the next likely target.
A sustained move under $111.21 will signal the presence of sellers. This could lead to a labored break due to a series of minor retracement levels at $109.06, $107.79 and $106.31. The latter is the last potential support before the $104.56 bottom.
The zone to watch this week is $111.21 – $113.49. Aggressive counter-trend sellers are going to try to stop a rally inside this zone. They are going to try to form a potentially bearish secondary lower top.
Bullish trend traders are going to try to trigger a breakout over the main top at $114.05. This would put the market back on course for a retest of the contract high at $120.88.