U.S. crude oil futures settled at $90.52 a barrel on Thursday, up $2.40 or 2.72% from Wednesday’s $88.12 settlement. The rebound follows a drop of more than 8% on Wednesday, when the U.S. midterm results raised hopes that a Democratic-controlled Congress would increase pressure on the Trump administration to end the war with Iran.
Gulf shipping risk is back in focus
On Wednesday, Senate Democratic leader Chuck Schumer said Democrats would seek to end the war, pointing to Congress’s control over spending. By Thursday, traders were again weighing the risk to oil shipments. Reuters reported that at least five vessels had reported incidents in the Gulf since Sunday, citing UK Maritime Trade Operations. Iran’s foreign minister also spoke with his Saudi and Qatari counterparts about diplomatic efforts. The prospect of de-escalation helped take some risk premium out of oil on Wednesday. The shipping reports gave traders a reason to put some of it back in on Thursday.
Wednesday’s U.S. inventory report also showed draws in crude, gasoline and distillates for the week ended October 30. The draws offered some support heading into Thursday’s session.
Buyers defended $86.65–$86.93. Can they get above $91.56?
On the WTI chart, the selloff reached $86.65, right near the 200-day moving average at the time. The 100-day moving average was between that low and the 50% midpoint of the rally from the July low at $86.93. That gave buyers a well-defined area to lean against, and they did.
The next test is $91.56, the broken 38.2% retracement of that same rally. The futures settlement was $1.04 below it. Move above $91.56 and stay above, and buyers would have more room to retrace Wednesday’s selloff. Stall there and sellers have a level to lean against. A break back below $86.65–$86.93 would put the 61.8% retracement at $82.30 in play.
Trading takeaway
A bounce off support tells you where buyers were willing to step in. The next clue comes at former support. If buyers can reclaim $91.56 and hold it on a pullback, they’ll have a closer level to define their risk. If sellers defend it, the bounce remains vulnerable to a retest of the lows.
This article was written by Greg Michalowski at investinglive.com.