I think at this point in time we are likely to see more noisy behavior than anything else, so you might need to look at this through the prism of buying on the dips in order to pick up “cheap oil.”
The West Texas Intermediate Crude Oil market went back and forth as the Tuesday session was more of the same noise. That being said, the market still looks at the $85 level as significant resistance, so I think we are simply backfilling in order to build up enough momentum to go higher. If we were to break above the $85 level, then it is likely that we could go much higher, perhaps opening up the possibility of a move towards the $87.50 level, and then possibly even the $90 level.
Underneath, I believe that the $80 level is significant support, so you need to keep in the back of your head that as it is a large, round, psychologically significant figure and an area where we have heard a lot of noise in the past, so I think it will eventually end up being the floor. The 50-day EMA is reaching towards that area as well, so I do think that there is probably a bit of a consolidation to come, mainly to build up enough inertia to finally break out above this barrier. If and when we do break above the $85 level, then I think we are likely to see this market go looking towards $87.50, and then finally the $90 level.
There continues to be a lot of concern about the supply of crude oil, so it is difficult to imagine that we will be in a scenario in which crude oil falls any significant amount anytime soon. I think at this point in time we are likely to see more noisy behavior than anything else, so you might need to look at this through the prism of buying on the dips in order to pick up “cheap oil.” As the world continues to reopen from the closing, it does make sense that demand continues to skyrocket. Furthermore, we have done almost nothing about capital expenditure during the pandemic, so that means that we will continue to see a lack of supply. OPEC has suggested no interest whatsoever in trying to increase production, so that should continue to be a situation where markets will continue to see plenty of upward pressure when it comes to the price of oil.