Crude Oil Price Update – Trader Reaction to $49.07 Main Top Could Set Next Week’s Tone

U.S. West Texas Intermediate crude oil futures hit a nine-month high on Thursday with the move driven by optimistic buyers betting on a successful rollout of vaccinations and progress toward a U.S. fiscal stimulus deal. Record breaking refining demand in China and India also supported the impressive gains.

At 21:54 GMT, February WTI crude oil is at $48.56, up $0.56 or +1.17%.

Traders also said the weaker U.S. Dollar helped drive up foreign demand for dollar-denominated crude. Prices were supported early in the session by overflow buying related to Wednesday’s Energy Information Administration inventories report for the week-ending December 11 that showed a drop in U.S. crude stockpiles by 3.1 million barrels versus a forecast calling for a 1.9-million-barrel drop.

Despite the rally, there are skeptics out there. Earlier in the week, OPEC and the International Energy Agency (IEA) warned about lower COVID-19-related demand in early 2021.

“It seems to be a much better festive season than most bullish traders could expect for. But whether oil prices can remain as high and keep these gains is still questionable amid the demand destruction lockdowns are causing,” said Bjornar Tonhaugen at Rystad Energy.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the March 3 top at $49.07 will reaffirm the uptrend. The main trend changes to down on a trade through $45.14.

The market is also trading on the strong side of a long-term retracement zone, giving it its robust upside bias. The nearest support is the long-term Fibonacci level at $46.04.

Short-Term Outlook

The next major decision for buyers is the test of $49.07. This is a critical area because not only is it potential resistance, but it’s also a potential trigger point for an acceleration to the upside with the February 20 top at $53.60 the next major upside target.

A failure at $49.07 won’t change the trend, but it may signal that buyers may have to regroup following a short-term retracement. The best support is the long-term Fibonacci level at $46.40. A failure to hold this level could lead to a change in trend.

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