The West Texas Intermediate Crude Oil market gapped lower to kick off the session on Monday, and then simply went back and forth as we slid a little lower. This is a market that is a little overextended, but obviously a very bullish one. That being said, the market will continue to see a lot of noisy behavior, but ultimately, I think this is a market that will attract plenty of buyers underneath. With that in mind, it continues to be a bit of a “buy the dip” type of situation, and as a result it is a market that you simply cannot sell.
There is still a lot of concern around the world when it comes to crude oil supply and the fact that the markets are reopening around the world. Keep in mind that OPEC has struggled to fulfill its quota, so it does make a certain amount of sense that we would continue to see markets struggle with the idea of selling off. Yes, I do believe that eventually we will based upon economy slowing down, but right now that is obviously not the prevailing thought.
Pay attention to the US dollar, because if it continues to be noisy, that will cause a certain amount of noise in this market to begin with. The move has been quite parabolic, so at the very least we probably need to pull back in order to build up momentum. I believe that the $90 level will continue to be important, so you should most certainly pay close attention to it, as it is a psychologically important figure. However, you should also keep in mind that the $87.50 level underneath should offer a significant amount of support as well based upon the recent price action.
Underneath there, then you have the $85 level looking to offer support, which had been the previous high. I do not think we will get that low, but if we did, then it is very likely we would continue to see a lot of interested buyers. If we break down below there significantly, then you have to think that perhaps something is wrong, perhaps the trend trying to turn. That being said, there is no real fundamental reason to think that is going to happen in the short term, so at this point you look at every dip as a potential buying opportunity.
