Crude Oil Price Update – Rally Driven by Short-covering and Momentum Buying

October West Texas Intermediate crude oil futures continued to trend higher on Wednesday in response to strong global refining margins and the reopening of Texas Gulf Coast refineries. The news is driving up demand for crude oil.

Some of the rally is being driven momentum buying, some by short-covering. Recall that last week, speculators went short crude oil in response to Hurricane Harvey. These investors are buying back those positions while other traders are jumping in the market on the momentum caused by the short-covering.

Traders are also speculating that Hurricane Irma will cause more fuel shortages if it takes out refineries in the Dominican Republic. Others believe the hurricane will lead to lower demand for gasoline.

Later today, investors will get the opportunity to react to the latest data from the American Petroleum Institute. Tomorrow, investors will hear from the U.S. Energy Information Administration.

Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Tuesday when buyers took out $48.91.

The main range is $50.51 to $45.58. Its retracement zone is $48.05 to $48.63. This zone is new support. Trading on the strong side of this zone is also giving the market a bullish upside bias.

Forecast

Based on the current price at $49.24, the direction of the market the rest of the session is likely to be determined by trader reaction to the uptrending angle at $48.95.

A sustained move over $48.95 will indicate the presence of buyers. This could create enough upside momentum to challenge the next downtrending angle at $49.73. This is the last potential resistance angle before the main top at $50.51.

A sustained move under $48.95 will signal the presence of sellers. Crossing to the weak side of the uptrending angle at $48.58 will signal the presence of sellers. This could lead to an eventual break into the 50% level at $48.05.