Crude oil price has extended its rally, hitting new multi-year peaks at $85.98 on the Brent crude benchmark. The rally in crude oil prices comes amid China’s energy crunch and rising industrial and retail demand.
So far, there are no signs of the OPEC+ alliance raising output, even as Reuters cites some sources within the coalition as saying that compliance cuts have dropped to 115%. The US government has also not made any moves to touch its strategic reserves.
As the cost of coal and natural gas continue to rise, industries are now switching to other crude oil derivatives as a source of power. Colder temperatures in the upcoming winter could also increase demand for heating oil and create more supply deficits.
Japan’s Prime Minister Fumio Kishida has said that his country would pressure oil producers to raise output. It is also possible that the US may do the same if crude oil price approaches $90 per barrel.
The Brent benchmark is trading 0.35% higher.
As crude oil price inches towards the 86.72 resistance, the emerging price pattern suggests a correction may be in the works. This correction has to occur from a pullback at the 86.72 price support/rising wedge upper edge, which eventually breaks the lower border of the wedge and the 85.70 support level. 84.11 is an initial downside target, followed by 83.08 and 81.91 if the decline continues.
On the flip side, a break above 86.72 targets further upside targets at 88.52 (1 November 2010 high and 18 June 2012 low) and the 22 September 2014 high at 91.32.
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This post was last modified on %s = human-readable time difference 13:59