Last week, West Texas Intermediate (WTI) crude oil traded down to $63.70 per barrel intraday, the same level it was trading at in early January. Much like the US stock market, prices had traveled both higher and lower in the first six months of the year, but was trading essentially unchanged from the level seen on the first trading day of the year.
To put it mildly, the situation has changed dramatically over the last week and a half. Spurred on by U.S. threats to cut off Iran’s oil exports and this morning’s surprising 9.9 million barrel drawdown in inventories (the biggest drop of the year so far), WTI has surged to test 73.00 as of writing.
From a technical perspective, WTI has rallied by nearly 15%% from last Monday’s intraday low, forming three large bullish marubozu candles along the way. These large bullish candles indicate strong buying pressure throughout the day and tend to foreshadow more gains in the coming days, keeping the outlook bright for oil longs.
In addition, “black gold” is peeking above its May high near 72.90 to hit its highest level since November 2014. As of writing, WTI is trading directly at this level, but a confirmed close above would open the door for continued strength toward previous-support-turned-resistance at the 2011 and 2012 lows in the 76.00-77.00 zone, with a break above that barrier opening the door to the psychologically significant 80.00 level.
Even if rates fail to break 72.90 resistance today, any pullbacks will likely be short-lived as long as WTI hold above last week’s lows, and bullish trend line support, in the mid-60.00s.