The U.S. West Texas Intermediate (WTI) crude oil futures as expected closed on their high on July 2 as the traders reacted to the better than expected United States Non-Farm Payrolls. A plunge in the unemployment rate also contributed tot he price surge. Oil markets seemingly showed little reaction to the rise in weekly unemployment claims and the growing number of COVID-19 cases.
Oil prices were also supported by a plunge in the American crude inventories that were reported earlier in the week. Trader reaction to the minor pivot located at the $39.36 level and the major Fibonacci level at $41.56 will expectedly set the near-term tone. On Thursday, August WTI crude oil moved to $40.65 and the U.S. benchmark was up 4.7% for the week.
The non-farm payrolls data that represents the past while the weekly unemployment claims in the US are the future. For now, the market has found support form the easing of restrictions on business and travel which is increasing hopes for future demand. A second wave of the virus, nonetheless, will dampen the hopes, and maybe restrict the rise in oil prices.
If the states begin to enforce various new restrictions or lockdowns, oil prices may retreat since it will lead to a drop in demand for distillates and gasoline.
Oil Price Technical Analysis
The main momentum is upward based on the daily swing chart. A trade through $41.63 will indicate a resumption of the uptrend. Any move below $37.08 will change the main trend to down. The minor range is $41.63 to $37.08. Its halfway level or pivot is located at $39.36 and it is controlling the near-term direction of the market. If the oil market closes above the level, it will become support.
The short-term range is $34.66 to $41.63 and its 50% level is located at $38.15 which is also support. The intermediate-range is $31.63 to $41.63 and the retracement zone has formed at $36.63 to $35.45 which is also a strong support. The primary long-term resistance is the Fibonacci level pegged at $41.56.
Oil Price Short-Term Review
Trader reaction is important and will play a major role looking at the minor pivot located at $39.36 and the major Fibonacci level at $41.56. These levels on July 6 will probably determine the next move in the market.
Dropping below the $39.36 will indicate a sign of weakness. Nevertheless, as a result of the 50% retracement levels at $38.15, $37.50, and $36.63, we are most probably going to see a labored break.
Looking upwards, any ability to smash $41.56 will be a conviction, and sustaining that oil price move may trigger an acceleration to the upside. The United States crude oil supply is falling at its quickest pace in history. That will ease the global oil glut and spur a swift recovery in the fuel and oil prices.
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