By ForexTime
Oil prices have hijacked our attention after surging to their highest level since November 2022!
The global commodity rallied over 7% last week after Russia announced that it will extend export curbs, with other supply and demand factors complementing upside gains.
Given how WTI crude simply cut through key weekly resistance like a hot knife through butter, bulls could be back in town. Taking a quick look at the technical picture, the trend is turning bullish with another potential breakout on the horizon.
Here are 3 reasons why oil could extend gains in September:
Signs of tight supply
Oil bulls continue to draw ample strength from the prospect of tightening crude supply thanks to production cuts from Saudi Arabia and Russia.
- Russia, the world’s second-largest oil exporter has announced curbs will be extended in October – with more details of the reductions to be unveiled in the coming days. It is worth keeping in mind that Russia has already cut production by 500,000 bpd in August and will cut exports by 300,000 bpd in September in an effort to ensure market stability.
- Saudi Arabia, the de-facto leader of OPEC is widely expected to take a similar action by also extending its voluntary 1 million bpd oil production cut into October, even as oil prices push higher.
Should these curb extensions become a reality, this could keep oil bulls in the driving seat – leading to higher prices.
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Energy demand optimism
China’s recent efforts to bolster economic growth coupled with growing speculation around the Fed ending its aggressive hiking campaign bodes well for the demand outlook.
- China has been plastered in the headlines after rolling out new measures of stimulus measures to stimulate its economy, as investor concerns over the growth outlook persist. This development has somewhat boosted sentiment towards the world’s largest energy consumer, lifting optimism over rising demand.
- Last Friday’s mixed US jobs report supported expectations around the Federal Reserve already ending its aggressive hiking cycle. Should this become a reality, it could be a welcome development for oil as lower interest rates support economic growth – translating to higher demand for oil.
Bullish technical forces
After bouncing within a wide range since November 2022, WTI Crude experienced a solid breakout above the $83.70 resistance level last week.
Oil seems to be gaining positive momentum on the daily charts with prices trading above the 50,100 and 200-day SMA. There have been consistently higher highs and higher lows while the MACD trades above zero.
- Bulls remain in a position of power and could push the global commodity higher if a solid breakout above $86 is secured.
- Beyond this level, the next key points of interest can be found at $89.50 and $93 – a level not seen since August 2022.
- A decline back below $83.70 may trigger a selloff towards $83. If this level is breached, bears may target the 50-day SMA around $78.50.
Article by ForexTime
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