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Oil goes back above $ 70 but the jury is still out


Oil buyers are transitioning well so far to start the week, building on the rebound from last week’s low of $ 62.43.

This comes against a backdrop of more positive risk as investors dismiss Omicron fears. But it can also be argued that the fall in oil was a bit exaggerated – technically speaking.

Since peaking in October, oil has fallen nearly 27% in just over a month. Whichever way you want to put it, it’s a steep fall.

Arguably the move was more or less sort of a retracement after nine straight weeks of gains and while there were hints of technical exhaustion, the omicron variant arrived just at the right time to give the sellers a leg up. .

So what’s next for oil now?

The latest rebound is encouraging and above all reaffirms the appetite of buyers. But this has more to do with the constructive view of oil, as the market picks up where it left off before the omicron.

However, the problem with this is that we still have no idea how omicron is going to affect outlook.

There are early signs of optimism, but like everything in this pandemic saga, you can never be 100% certain. As such, virus fears are still a key consideration early next year.

From a technical standpoint, the bounce is something buyers can appreciate. The upward push now sees price defying the 200-day moving average (green line) at $ 70.00. Added to that was a slight push above the 200-hour moving average of $ 70.43, putting buyers back in control in the near term.

As such, stay above $ 70 and psychologically it’s a good platform to build on in future sessions.

All else being equal and while omicron’s concerns are less than feared, I anticipate a quick and strong rebound in oil to possibly retest the highs of October and early November. But in small steps, we are not yet out of the woods.


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