WTI crude oil prices (USOIL) gained for a second consecutive week and seen once again attacking resistance at the psychological $50.00 handle. Oil prices have gained on expectations of increased demand as both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) reported that the glut was shrinking while forecasting stronger demand in 2018.
USOIL posted five consecutive daily gains after finding support at $47.07 in the early week. The horizontal level has been well-respected as of late, acting as resistance on two attempts in July. There was a marginal and brief breach above the $50.00 price point for a high of $50.47 on Thursday but following a drop back below the psychological handle, it acted as resistance on Friday.
The latest oil inventories report released by the Energy Information Administration (EIA) revealed a build of 5.9 million barrels in the week to September 8th which was above the consensus for a build of 4.0 million barrels and followed a rise of 4.6 million barrels in the prior week. The data, however, had little impact on oil prices other than a volatile initial reaction.
COT data for NYMEX crude oil has been showing a deterioration of bullish sentiment as of late with non-commercials reducing net long exposure to the lower end of the average seen in the past year. The latest COT report recorded a decline to 374,480 contracts held net long from 382,113 contracts, attributed to a combination of long covering and an increase in short contracts.
Recent price action combined with the trend that has been in play since June suggests oil prices are ready to extend the upward momentum, however, the $50.00 price point will be a hurdle. In the event of a bullish break, further resistance is found at $51.50 which has held USOIL lower on three attempts since mid-2016, each turn resulting in a notable decline. Support for the week ahead is found at $48.68 which is a horizontal level that has been respected as both support and resistance on a 4-hour chart.