Oil stays on course to retest the October, November highs

Read full post at forexlive.com

Oil looks poised for a fourth straight week of gains and buyers are continuing to show plenty of appetite even as the week winds down. Price is now trading above $83 to its highest since 10 November:

The technical break above $80 is still running and that has been a supportive factor to the recent run this week, as highlighted previously here. On the fundamental side of things, there are still reasons to stay bullish.

For one, omicron risks are projected to subside by around Q1 2022 and that could see demand conditions pick up again. Meanwhile, on the supply side of things, the decision by OPEC+ to increase output by 400k bpd each month isn’t as convincing if the bloc members are not able to meet said production quotas anyway.

That means there could be undersupply on its way and that will add to the underinvestment outlook in the oil market that is likely to gain traction in the months/years ahead.

The latter may still need time to play out but for now, oil continues to look bullish targeting the resistance around $84.85 to $85.00 level. We might encounter some technical resistance and exhaustion there, after quite a stretch of gains. But as long as prices keep above $80, there is a good base to build on for the next leg higher moving forward.

The big risk to all of this though is China. So, keep an eye out for that.