Crude Prices Surge on Output Cuts and Inflation Data, Potential Resistance at $83-$84

Output cuts and inflation data continue to boost crude prices
Temporary disruptions could add to the bullishness
Potential resistance around $83-$84

Oil is trading relatively flat today but has made tremendous gains over the last couple of weeks and could still add to that over the coming sessions.

The price has risen more than 13% from the lows on 28 June and, despite appearing to struggle at times yesterday, still has plenty of momentum. The break above $80 was very significant after multiple efforts by Saudi Arabia and its allies to manipulate the price to more sustainable levels, from their perspective.

Temporary output disruptions, like those currently in Libya and Nigeria, could further lift prices in the short term as potential tightness in the market on the back of cuts and economic resilience boost demand.

Key Resistance Lies Ahead

Brent could face an interesting test around $83-$84 if it keeps rallying, with the boost from US inflation data and Saudi/Russian cuts potentially giving it an additional boost, as well as the psychological lift from this week’s breakout.

The 200/233-day simple moving average has been a key zone of support and resistance previously and could prove to be so again. It hasn’t traded above here in more than a year so a break above would be significant.

A move lower could draw attention back to $80 and whether we’ll get that confirmation of the initial breakout. A move below here wouldn’t necessarily be a particularly bearish move, with the 55/89-day SMA band around $76-$78 arguably more important, falling around the upper end of the descending channel. It could also fall around a key fib level depending where the price peaks first.

Craig Erlam

Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.