The key support today is the 200-day moving average at $60.51. If it fails to hold then buyers will have another opportunity to re-enter at 50% levels at $59.80, $58.93 and $58.52. This entire support base is being propped up by the 50-day moving average at $58.34.
With the main trend up according to both the swing chart and the moving averages, the market is currently in “buy the dip” mode.
On the upside, if momentum continues to build above the 200-day moving average, then look for a run into the main top at $62.20. This is a potential trigger point for an acceleration into the September 26 main top at $64.75.
Weather Disruptions and Geopolitical Tensions Drive Early Strength
Two of the drivers of the early session strength are the weather and the simmering tensions between the U.S. and Iran. Both drove the market higher on Friday ahead of the weekend and both are expected to continue to impact prices this week.
As far as the weather is concerned, winter storm Fern is punishing a major portion of the United States from Texas to Maine, “forcing shut-ins in major crude and natural gas producing regions, and adding stress to the power grid,” said Prynka Sachdeva, senior market analyst at Phillip Nova. Prices are being underpinned because the outages are tightening physical flows.
Backing this claim is JPMorgan analysts who said in a note on Monday that about 250,000 barrels per day of crude production has been lost in the U.S. due to harsh weather, Reuters reported. This includes declines in the Bakken field in Oklahoma and parts of Texas.