CFD Update: Oil fightback returns to resistance.
Hi traders, today we’re looking at oil as price completed its second higher session taking price back to previous resistance and supply.
Looking at the current D1 chart below, we can see that price remains below the main downtrend. However, now see a new uptrend in the works after price set a few higher lows. The last two-day rally has taken us back to 73.25 area resistance and supply. This level has held firm for sellers since November when Omicron worries rattled future demand and sent price crashing. Covid, lockdowns and their impact on future demand have been a big influence on the price of oil. OPEC cuts are another factor but for now, the damage Covid can cause on global demand remains the key driver. The evidence continues to remain quite clear on the price charts.
The current recovery continues to ride off the risk recovery that has been building this week. Omicron spreads faster but, for now, it doesn’t look to be increasing hospitalisations and deaths. That’s a big factor in forecasting if we will return to lockdown conditions. Yes, parts of Europe are in lockdown due to delta case numbers but for now, oil looks to be discounting them.
The move was really set up on Monday as price raced down below 66.50 before the recovery set in. This was seen across stocks indexes as well as oil last Monday. From here, as long as the current momentum remains in play, we will look to see how buyers deal with current resistance and if they can break through it pushing the recovery forward. A break of the main trend would also start to put forward a stronger case for the new downtrend to become dominant. But first, we will need to see if buyers can break through the current consolidation and resistance seen at 73.25.
Mixed outlooks. The IEA advises that the recovery is expected to be affected by a new surge in Covid-19 cases, with jet fuel being hit hard. Travel restrictions have already been implemented due to the new variant. The IEA also added that while the rise in new Covid cases was expected to hurt demand, the recovery that is already underway was not expected to be completely derailed.
On the other hand, JP Morgan has predicted that oil could see new highs for demand in 2022 and again in 2023. They also said oil reaching 100 USD per barrel could also be a possibility.