A Tokyo holiday has meant a quiet session in Asia for crude oil as it ignores overbought technical indicators.
Crude oil meandered higher in a subdued session overnight as the market awaits key U.S. employment data this afternoon. Oil was supported by rhetoric from Saudi Arabia and Iraq that OPEC compliance had been pleasing and that they supported an extension of the production cut agreement through to December 2018. Venezuela’s announcement that it was attempting to restructure all of its foreign debt should continue to be price supportive as well as its almost inevitable default looms ever closer. This may cause supply disruptions from the South American country further tightening supplies.
We continue to advise caution, however. Although both Brent and WTI look constructive on the charts, the RSI’s on both are at very overbought levels. This short-term indicator suggests that despite the confidence in the market, they could be vulnerable to a near-term downside correction. Possibly quite an aggressive one.
Brent Crude climbed 35 cents to close at 60.95 in New York, rising a further 15 cents to 61.10 in early Asia. Brent has a well denoted triple bottom at 60.20 which should form strong support initially. Below this, we see 60.00 and then 59.00 as the next supports. Resistance is at 62.00 with little on the charts beyond there. We assume that more selling will appear at the 63.00 area.
WTI spot climbed 50 cents to close at 54.55 in New York as U.S. exports hit record highs and have drifted 10 cents higher to 54.65 in early Asian trading. WTI has a congestion zone of a series of daily lows between 53.50 and 53.70 that will lend reasonable support initially. Below here lies the daily uptrend support line at 52.90 with a break opening a drop to 52.00. Resistance is at 55.00 with a break clearing the path to the 56.50 regions.
