Rebounds above $85 despite overbought conditions

  • WTI price snaps the corrective mode from seven-year highs, recaptures $85.
  • PBOC LPR cut, weaker US dollar and risk reset underpin the black gold.
  • Acceptance above $85.50 is critical to take on the multi-year top once again.

WTI (NYMEX futures) is trading close to $85.50, having staged a solid comeback from a drop to near the $84.60 region.

The correction in oil prices came on the heels of a dour mood on Wall Street overnight, as rallying Treasury yields weighed on the sentiment while traders fret over the Fed rate hike outlook.

The resumption of the key Iraq-Turkey oil pipeline in full flow, after the explosion, also collaborated with the pullback in WTI alongside discouraging monthly report from the International Energy Agency (IEA).

However, the latest recovery in the risk sentiment, in response to the Chinese central bank’s mortgage rate cuts announcement, helps oil price resume the upbeat momentum.

Going forward, it remains to be seen if the US oil can sustain its uptrend, given that the 14-day Relative Strength Index (RSI) holds within an overbought territory.

If sellers fight back control, then a break below the daily lows of $84.59 is needed to extend the correction. The round level of $84 will then come into play.

On the flip side, buyers need to find a strong foothold above $85.50 to initiate a fresh upswing towards the multi-year highs of $86.67.

WTI: Daily chart

WTI: Additional levels to watch


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