WTI Cost Analysis: Bulls Eye $76.50 Barrier

ByBarbara Byrne

Sep 30, 2021

WTI is making moderate advances, dabbling with the $75 line, as bulls wait for a significant trigger to launch the next bold effort.  After receiving positive news about China Evergrande and seeing US Treasury yields fall, as well as fear of a possible US government shutdown, investors have returned to riskier assets, which bodes well for the higher-yielding WTI.

The resumed upward movement in the price of US crude oil has purchasers keen to retake the $76 mark, which is displayed on the daily chart. Although WTI bulls have managed to regain control of the market after a retracement from fairly close three-year peaks of $76.50 on Tuesday, they are remaining on the wary ground due to the relentless rise in US Treasury yields, which has historically reduced oil consumption as a substitute higher-yielding resource.

China Energy Crisis

Furthermore, world economic worries re-emerged as a result of a power outage in China and a petroleum scarcity in the Eurozone, which resulted in industry closings, limiting the rising movement in oil. Nonetheless, the bullish tendency is still in place, as WTI rates are poised to test crucial horizontal barriers in the mid-$76s region. The 2-week Relative Strength Index (RSI) is still pointing north, well above the centerline, indicating that there is still a possibility for more rises.

WTI1 CHART. Source: Tradingview.com

Furthermore, the 50-day moving average (DMA) is poised to cut through the 100-day moving average (DMA) from underneath, indicating the possibility of a bull cross verification. On the negative, the critical level is Wednesday’s low of $73.56, below which a steep pullback towards the upward-sloping 21-day moving average (DMA) at $71.35 is very certain. Before that, the bulls may be able to find some relief near the low of $72.72 reached on September 24.

Crude To Remain Stable Due To Supply Constraints

Because Asia and Europe are having difficulty safeguarding adequate power stockpiles in front of winter, and the fact that US stock has not bounced back as rapidly as expected, and that OPEC+ may have difficulty providing the production levels necessary to achieve its goal of balancing the industry, petroleum industries may very well proceed to capture a proposal as we progress into the fourth quarter.

Given that OPEC+ has struggled to deliver on the pledged increased production, and that US industrial production has been disappointing due to a lack of invested capital, and that demand has been trending upward, a move to an increased trading range with $80+/b is feasible in the following months as power prices all around the globe have been soaring.

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