While US$80 oil seemed in the clouds just a year ago, it now looks primed for capture.
Technical indicators show that the price Saudi Arabia is said to be aiming for may be within reach, with global benchmark Brent crude already near US$74 a barrel. While futures in London have broken past the 50 per cent Fibonacci retracement of the slump from when they were above US$100 in mid-2014, another signal shows the rally could persist to the line just under US$82.
Recent corrections in Brent have shown prices hit a speed bump only when the reading on its Relative Strength Index climbs to 75, well past the usual overbought signal of 70. With that measure now at about 68, it points to continued support for crude on its way up.
Apart from the technical indicators, investors will also be watching tumbling U.S. petroleum stockpiles, which now stand below their five-year average for the first time since 2014, and record American production. Geopolitical tensions continue to simmer, meanwhile, with U.S. President Donald Trump due to make a decision that could lead to sanctions being reimposed on OPEC member Iran.
A return of financial and economic restrictions on the Persian Gulf state could remove 500,000 barrels per day of the country’s crude from global markets, according to one analyst estimate.
--With assistance from Mark Cranfield