WTI crude oil recently busted through short-term resistance at the $83.65 per barrel level then reached a high of $85.42 per barrel before retreating.

Price is now testing the broken resistance, which lines up with the 38.2% Fib to add to its strength as a floor. A larger correction could reach the 50% level that coincides with the 100 SMA dynamic inflection point and the $83 per barrel major psychological mark. The 61.8% Fib might also keep losses in check since it lines up with the 200 SMA dynamic support.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support is more likely to hold than to break. However, the gap between the indicators is narrowing to reflect weakening bullish momentum.

Stochastic is in the oversold region to signal exhaustion among sellers, and turning higher would mean that buyers are taking over. RSI is on middle ground to reflect consolidation but appears to be on the move down, so a larger correction might follow.

Crude oil prices remain elevated as supply levels are constrained worldwide. Demand is picking up as more businesses are resuming normal operations while economies reopen, and this phenomenon could persist now that big cities in Australia and Japan are coming out of lockdowns.

Recall also that the OPEC refrained from increasing their production deal until the end of the year, so supply could remain limited until then. To top it off, weather disturbances in China and the US are keeping output in check.

The upcoming inventory reports from the API and EIA would shed more light on supply and demand conditions in the US, as another draw in stockpiles would confirm that the energy crunch is still going on. A build, on the other hand, might suggest that producers are able to keep up with the rise in purchases.