WTI Oil breaks out as Russia menaces with output cuts and USD weakness fuels energy rally
BY
Ben Graham
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WTI prices have been erratic, even without a clear direction in the past few weeks.
WTI Oil has been moving sideways, gradually decreasing, since early July.
Forming an initial range from $65 to $70, then taking steps towards lower levels, August led another consolidation between $62 to $66.
With Russia announcing it is close to reduce its oil output due to the heavy (and successful) drone attacks, prices have began an impulsive move higher.
Moving towards the final months of the year, headlines still revolve around higher OPEC+ output but also a continuing Ukraine-Russia war (Trump said a few lines on this earlier), which notably shook up yearly flows throughout Ukraine’s efficacious attacks on Black gold, sold at a huge discount to sponsor the Russian aggression.
At one point, Russian refinery production was reduced by 1/5, as mentioned in a recent Reuters piece.
Despite this heavy supply, supplemental tariffs on russian oil buyers have formed consequent reversals at the recently reached quarterly lows.
Friday seemed to provide an initial spike with Trump’s latest tariff headlines (as highlighted in our previous Oil piece) but quickly followed up with a selloff going into the weekend.
This week, however, commodities are seeing a huge boost with LME Copper prices hitting new highs, Silver and Gold rallying yet again, and energy commodities seeing a heavy boost. The common denominator, the US Dollar, is getting ravaged, which helps this ongoing rally.
Trump's Chief Economist Miran has been signed to join the FED as an intermediate member, right before the FOMC meeting began, which has contributed to further weakness in the USD (= FED Independence challenged), giving a further boost to US Oil prices.
Anyway, let's have a close look at Oil charts and levels to see how the current flows are changing the previous narrative. Has a bottom been found for petrol?
Read More:
US Oil 1H Chart
The double bottom mentioned in Friday's analysis has indeed come into play despite the breakout not gaining direct traction (prices first retraced to the lows of the $63 support).
However, with the current impulsive move breaking the $63.84 range-high resistance, Oil prices don't have much to stop them before the $65.5 to $66 Pivot region (Blue square).
The 1H RSI is not in overbought territory just yet and prices are forming an imminent tight bull channel (bull candles overlapping each other, valid until one bear candle closes below the previous).
The current pre-FOMC volatility is rare, so expect tomorrow to be even more volatile, particularly depending on what Jerome Powell says.
Let's take a small step back to spot where we are on the bigger picture.
WTI Oil 8H Chart
After forming a double bottom at the lows of its intraday descending channel, Oil is heading higher on strong bull candles.
The two 8H bullish candles formed after yesterday's 1% up-move have helped to breach the 50-period Moving Average.
With RSI momentum also going in positive territory, the only hurdle for sellers will be the mid-level of the channel. Such momentum will find it difficult to hold such a line (which tends to act more on indecisive moves).
Follow the strong flows from today's session and look at the US Dollar (EURUSD or DXY are two good guides to today's action)
Levels to place on your WTI charts:
Resistance Levels
Support Levels
Safe Trades!
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