Commodities Analysis & Opinion

Where Next For Oil?

Following the recent surge in oil prices, we look at the commodity’s daily, weekly, and monthly charts to see where it may be heading next.

Starting with the monthly chart: here we have the price action trading within the spread of last month’s volatility candle but approaching the low of that candle. This also coincides with our R4 Camarilla pivot, which should provide support.

Crude Oil Monthly Chart

Moving to the weekly chart, the critical level (at least for this week) is the S3 pivot at $90 per barrel. Of our 6 levels, the third is probably the most important and is where price often pauses and consolidates.

Crude Oil Weekly Chart

According to the volume point histogram, we also need to note that price action is trading in a low volume node. Therefore, price moves are likely to have momentum as there is little resistance in volume.

Finally, to the daily: as noted on the chart, we are currently trading below the volume point of control with the price action fast approaching the S3 pivot at $95.
The picture describes an effort to tackle rising gas prices from a fundamental perspective. President Biden has authorized the release of an unprecedented 1m barrels per day for 180 days from the SPR (Strategic Petroleum Reserve).

Crude Oil Daily Chart

OPEC and its allies agreed upon this increase in supply (and the increase in production). Figures are around 432k barrels per day, although this is not due to begin until May despite calls for the increase to be brought forward. Plus, at the time of writing, the IEA has also agreed to release 120 mln barrels of oil to ease prices, with the US providing half, the rest coming from other IEA members.

In my years of writing about oil, I don’t recall such a concerted effort to increase supply, but we are in unprecedented times. The question is, when will this additional supply begin to impact the price. To which there is no easy answer.

My view is that the additional supply is likely to affect prices once OPEC and its allies begin to ramp up production.

In the meantime, all we can do is watch the charts and take note of critical levels in the current move lower, as this is where the price is likely to pause and may even bounce.

And, as always, be aware that volume will have to validate the price action.


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