Key Takeaways:
West Texas Intermediate crude oil futures reclaimed the key $103.69 level on Wednesday, with Brent crude holding near $110.69, as the energy complex displayed strong bullish momentum even as traders suggested geopolitical risk premiums have faded.
"The market has stopped waiting for a diplomatic resolution to supply disruptions; the bids are coming in hard on technical breakouts," said James Hyerczyk, a seasoned technical analyst with over 40 years of experience. "This is a market pricing in a prolonged disruption, and the charts are reflecting that."
The move in WTI puts it in a position to challenge the main swing top at $103.78, a potential trigger for an acceleration toward near-term objectives at $110.93 and $117.63. Brent crude futures are testing resistance near $110, with further upside targets at the war-driven tops of $115.24 and $119.44.
The rally suggests that falling inventories and strong underlying demand are now the primary drivers, replacing headline-driven volatility. A sustained break above these technical levels could confirm that the market is shifting its focus to a structural supply problem, forcing a repricing of energy for the summer driving season.
July WTI crude oil futures closed last week in a position to challenge the main swing top at $103.78. This is a potential trigger point for an acceleration to the upside with near-term objectives at $110.93 and $117.63. The series of higher bottoms is a strong sign that buyers continue to enter the market on price dips.
On the downside, near-term support is a pair of retracement zones at $97.04 to $94.96 and $90.50 to $87.36. As long as the 50-day moving average holds as support, traders will likely remain in a "buy the dip" mode.
July Brent crude oil futures also closed in a bullish position, putting it in a position to challenge the two war-driven tops at $115.24 and $119.44 early this week. An extended rally over $119.44 could launch a further move into $126.69.
Solid support is layered at $106.69, $102.75, $100.65, and $97.21. With the long-term trend supported by the 52-week moving average, buy-the-dip traders are likely to keep coming in on any breaks into major support levels.
Natural gas prices surged above $3.10 with strong momentum, climbing over 5% on the session to a high of $3.12. The move indicates that the bullish sentiment is not isolated to crude oil. Strong demand for electricity generation and exports, coupled with inventory levels that are below the five-year average, are providing fundamental support for the rally. The breakout above the psychological $3.00 level could attract further technical buying.
This article is for informational purposes only and does not constitute investment advice.
