WTI crude is down 0.6% on the day to $67.14
After a brutal drop last week, oil prices have recovered well in the first two days this week as broader risk sentiment also turned for the better; a softer dollar also helped.
That has seen oil bounce off its May lows to rally back above $67 but we are seeing the upside momentum stall ahead of the 100-day moving average (purple line).
That will be the key technical level to watch in the sessions ahead to see if buyers can open up the next upside leg in oil, with further resistance then seen closer to $70 next.
As things stand, delta variant concerns are still a risk for oil but if anything, they are likely to prove to be mere hiccups as global virus restrictions should continue to be eased as vaccinations pick up in the months ahead.
China also appears to have quickly put a stop to its latest local outbreak, helping to ease worries about a prolonged hit to consumption activity and oil demand.
As such, the broader outlook for oil going into next year remains relatively unchanged as the market is likely to remain tight and that is supportive of higher prices in general.
Overall sentiment on the pandemic and the delta variant is still likely to keep oil gains limited in the short-term but if the market starts to sense a convincing turn in the battle against the virus, there’s room for oil to rally much further from these levels.
For now, the dollar and Jackson Hole are other key factors to consider but in all likelihood, Powell & co. are unlikely to spoil the risk party this week.
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