WTI crude oil is trending higher, as price bounced off the rising channel support and broke through the mid-channel area of interest. The commodity is closing in on the channel top at $80 per barrel.
The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside. In other words, resistance is more likely to break than to hold. Price is also above both moving averages, so these could hold as dynamic support on dips.
However, stochastic is already indicating overbought conditions or exhaustion among buyers, so turning lower would mean that sellers are taking over. RSI is also in the overbought zone to suggest that buyers could use a break. In that case, a quick pullback to the mid-channel area of interest might follow before the rally resumes.
Crude oil prices are hovering near three-year highs as traders expect another supply crunch to take place. Recall that Hurricane Ida led to several shut-ins among production facilities, leaving majority of output offline and some needing repairs. Another tropical storm is on the horizon and could mean more downside on supply.
Analysts are raising forecasts for WTI and Brent crude oil prices for the end of the year on expectations that demand would pick up as more economies resume normal activity. More businesses have been reopening, leading to stronger consumer spending and manufacturing figures. In turn, this could boost demand for fuel and energy commodities.
The upcoming inventory report from the API and EIA would likely impact near-term movements for crude oil, as another large draw in stockpiles could sustain the commodity’s rally. On the other hand, a surprise build might suggest that supply has bounced back or that demand has taken a huge hit in the past week.