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Will Oil’s Upward Trend Hold?

Last week, I suggested a trade that bracketed crude, going long on a break above $70 or short should CL drop below $67. That worked out well as a break above $70 was followed by a surge to over $73. I made good money on that and I hope you did too, but now we have fallen back again, are in mid-channel once more, and I find myself looking around for inspiration.

I make a living by having opinions, both as a trader and as a writer, so it is not often that I give in and say I don’t know where a market is headed. That, however, is the case with crude right now. The retreat from the July $76.98 high in CL looked for a while to be taking the form of a wide but conventional descending channel, then that all disappeared this week with the strong break back above $70. That move, however, couldn’t be sustained, as crude has given back around 2% over the last couple of days. Now we are stuck in the middle of an unconfirmed upward trend and could break either way…

It is little wonder that the chart for CL is a bit confusing because the fundamental supply and demand picture that drives longer-term trends is itself unclear.

Supply is still somewhat restricted, as it has been all year. OPEC+ didn’t reinstate the full output cuts as the Delta variant causes a global resurgence of Covid-19, but they did keep the current schedule of only gradual reinstatement of the emergency, pandemic prompted cuts. That means that while output is increasing,…





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