Both Brent and WTI survived further selling pressure on Friday to make back all their losses and close near the highs of the day and ekk out higher finishes, up 20 cents and 40 cents respectively. The Baker Hughes Rig Count, released late Friday, showed a small drop surprisingly and this seems to have given both contracts a bid tone as they start the day at 51.95 and 48.80.
Data wise the highlights will be the usual crude inventories with traders closely watching the shapes of the oil futures curves as both race towards backwardation from years of contango, implying that finally, the market is seeing the light at the end of the oil supply tunnel.
The FOMC minutes may play its part, but oil moves will more likely be vulnerable to sabre-rattling headlines between the U.S. and North Korea. Given the positive start to the week an escalation in tensions should see oil prices firm as opposed to the counterintuitive moves lower of last week which we believe was caused by extended short term long positions.
Brent spot tested its 200-day moving average on Friday at 51.55 but closed above, and this forms intra-day support. This is followed by 51.00 and then the critical 50.55 regions. Home to the 100-day average and 50% Fibonacci retracement. Initial resistance is at Friday’s high of 52.10 followed by the much more significant 52.70 level.
WTI spot bounced from its 100-day moving average at 47.85 on Friday to settle just below its 200-day average at 49.15. These two levels will set the range in initial trading in Asia today.