WTI oil has recently made several attempts to settle above the $70 level but failed to gain additional upside momentum and pulled back.

However, WTI oil remains close to this psychologically important level and has a good chance to get back to yearly highs in the remaining months of this year.

It is already clear that coronavirus-related concerns have failed to put big pressure on oil as many traders were ready to buy any significant pullback. As a result, WTI oil has quickly rebounded from the $62 level to the $70 level.

While the situation with coronavirus remains a big concern for oil traders, recent data suggests that the number of new daily cases in the world has started to decline. Importantly, the number of daily deaths has began to decline as well.

Watching this grim data may be more important to the analysis of potential coronavirus-related restrictions around the world as governments will likely focus on critical cases and deaths rather than on total caseload as vaccination progresses.

Meanwhile, recent inventory reports indicated that crude inventories continued to decline. According to the latest EIA Weekly Petroleum Status Report, U.S. commercial crude inventories declined by 7.2 million barrels from the previous week. U.S. domestic oil production increased from 11.4 million barrels per day (bpd) to 11.5 million bpd but it will take a hit in the upcoming reports due to the negative impact of Hurricane Ida.

OPEC+ has recently decided to stick to its plan to raise oil production by 0.4 million bpd per month as the organization believed that demand recovery was strong despite challenges presented by the spread of the Delta variant of coronavirus.

In fact, OPEC+ increased its demand growth outlook for 2022 to 4.2 million bpd. The economic rebound continues at a robust pace thanks to the strong support from the world’s central banks and governments, and demand for oil looks strong as well.

The key question for the oil market is whether the world will have to deal with another wave of the virus at the beginning of the flu season in the Northern Hemisphere. More coronavirus-related restrictions may put pressure on demand growth, but governments’ desire for new lockdowns appears limited except for countries like Australia and New Zealand, which are located in the Southern Hemisphere.

In case developed countries manage to get through the beginning of the flu season without new restrictions, oil demand will continue to grow while crude inventories will remain under pressure. In this bullish scenario, WTI oil will have a good chance to test yearly highs near the $77 level.

Let’s start with the weekly chart. WTI oil failed to get to the test of the 50 EMA as it received strong support near the $62 level. The rebound was very strong, and WTI oil has quickly managed to get back above the 20 EMA which is located at $67.60.

Currently, WTI oil is stuck between the support at the 20 EMA and the resistance at the psychologically important $70 level. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

In case WTI oil manages to get back above the $70 level, it will head towards the next resistance at the $74 level. A move above this level will open the way to the test of the resistance which is located at yearly highs at the $77 level.

On the support side, a move below the 20 EMA will push WTI oil towards the recent lows near the $62 level. Oil ignored technical levels during the recent moves in the $62 – $67 range, but it remains to be seen whether it will be able to gain strong downside momentum and quickly get to the test of the recent lows near $61.75 as the oil market looks ready to buy strong pullbacks.

As usual, more levels can be found on the daily chart. However, it should be noted that the road to yearly highs still looks rather easy in case oil manages to settle above the resistance at the $70.

Most likely, the market will attract more speculative traders once oil settles above $70, and oil may quickly get to the test of the next resistance at $72.50. A move above this level will push oil towards the above-mentioned resistance at $74.

On the support side, a move below $67.60 will open the way to the test of the support level at $66. In case oil declines below this level, it will head towards the next support at $64. If oil manages to settle below the support at $64, it will move towards the support at the recent lows at $61.75.

S&PGlobal by Surabhi Sahu, September 14, 2021