Oil Consolidating Around $49.00 in a Holiday Shortened Week

In the immediate aftermath of the historic Brexit referendum, WTI crude oil last week see-sawed before settling higher to post its first weekly gains in the previous three, finding support from sixth straight weekly decline in US crude oil inventories.

The commodity witnessed a late surge on Friday despite the Baker Hughes reported a rise in US oil rig count for a fourth week in last five-weeks. According to the report released on Friday, the weekly number of active US oil rigs climbed by 10 to 431. The count had fallen in the previous week and prior to that had risen rose in each of the previous three weeks.

On Monday the commodity failed to gain further traction and was seen struggling for direction around $49.00 level. However, Sunday’s news of a Nigerian rebel group’s attacks on the Nigerian oil and gas infrastructure influence oil prices on Monday and limited any sharp downslide.

The ongoing worry over terrorist attacks is threatening to limit efforts to boost production from Africa’s largest oil producer. Nigerian crude oil production has slumped to 30-year low levels and has been severely hit by recent attacks by the Niger Delta Avengers militant group. The ongoing geopolitical tension and supply disruption worries from Nigeria has now become an ongoing issue and might continue influencing investor sentiment surrounding oil prices.

The commodity’s sharp up-surge from multi-year low level of $27.55 marked a turnaround after its sharp fall from 2014 peak level of $106.00. Some analyst believe that the commodity is likely to continue performing well through the next several months as the uncertainty surrounding the UK’s decision to leave the European Union seems to have faded over the course of past few trading session.

It should, however, be noted that things look better one day and turns worse the next day, which might continue to fuel volatility in coming days. On Monday, the commodity is likely to consolidate in the holiday-shortened week as traders now await the weekly supply reports from the API and EIA for fresh incentives on oil, ahead of Wednesday’s FOMC minutes and the keenly watched US monthly jobs report on Friday that could further fuel volatility in the market.

Technical outlook

From current levels, momentum above $49.50 seems to boost the commodity back towards the very important $50.00 psychological mark resistance. Only a strong follow-through buying interest might negate any near-term bearish expectations and pave way for a further up-move back towards June daily closing highs resistance near $51.40-50 area.

Alternatively, sustained weakness back below $49.00-48.80 immediate support seems to drag it back towards $48.30 intermediate support before the commodity breaks below $48.00 handle and head towards testing its next support near $47.50 region.