U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Thursday as investors continue to bet that demand would outstrip supply into the end of the year.
The trade started firm as the latest government reports released on Wednesday showed supplies in the United States further tightened after shrinking to the smallest levels since January 2020.
The rally then picked up steam throughout the session as the U.S. Dollar plunged to its lowest level since June 29, following dovish comments from Federal Reserve Chairman Jerome Powell late Wednesday. A weaker dollar can boost investor demand for dollar-denominated commodities, including crude oil.
At 18:40 GMT, September WTI crude oil is trading $73.59, up $1.20 or +1.66%.
Although Powell may have expressed a dovish tone about policy, the Fed did say in its monetary policy statement that the U.S. economic recovery is still on track despite the rise in coronavirus infections. This bodes well for future demand, which took a hit recently on worries over demand destruction due to the renewed outbreak of infections.
In other bullish news, Reuters reported that crude may have gotten an additional boost from chatter from Iran that suggested a nuclear deal was not imminent. An agreement between the U.S. and Iran is potentially bearish because it would bring more oil into the market.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, but momentum is trending higher. A trade through $74.90 will change the main trend to up. A move through $65.01 will signal a resumption of the downtrend.
The minor trend is up. This is controlling the momentum. A trade through $70.56 will change the minor trend to down.
The main range is $76.07 to $65.01. The market is currently trading on the strong side of its retracement zone at $71.85 to $70.54, making it support.
Daily Swing Chart Technical Forecast
We’re looking for the upside bias to continue as long as September WTI crude oil can hold above the retracement zone at $71.85 to $70.54.
The daily chart indicates the market has room to run with the next potential upside targets coming in at $74.90 and $76.07.