On Thursday, crude oil climbed to $104.38 and reached its highest level since September 23. However, this improvement didn’t last long. The price of light crude dropped to $102.87 (an intraday low) as further easing of tensions between Iran and the West over the Middle East country's nuclear program dragged on prices. The United States held out the possibility of giving Iran some short-term sanctions relief in return for concrete steps to slow uranium enrichment and shed light on its nuclear program.

Despite this drop, oil bulls managed to hold the price of crude oil above $102 per barrel also on Friday. During the last session of the previous week, light crude gained 0.77% and reached $104.19 per barrel as energy companies in the Gulf of Mexico started shutting in production and were evacuating some workers as Tropical Storm Karen headed towards a crucial part of the basin.

What impact did these events have on the price of crude oil?

Although crude oil closed Wednesday almost at the rising medium-term support/resistance line, buyers didn’t have enough strength to break above this resistance until the end of the previous week. Looking at the daily chart, we see that there were three attempts to move above this level, however, they all failed. Taking this fact into account, the price of crude oil may test the strength of the 38.2% Fibonacci retracement level once again.

Please note that crude oil remains in the declining trend channel. Therefore, if we see a breakout above the medium-term support/resistance line, we could see a move up to the declining short-term resistance line based on August 28 and September 19 highs – currently close to the $106.4 level (marked with blue).

The nearest support is the September low and the 38.2% Fibonacci retracement level. If it is broken, the next one support zone will be slightly below $100 per barrel where the 50% Fibonacci retracement level intersects with the June high.

Summing up, although the situation improved slightly at the end of the previous week, three unsuccessful attempts to break above the rising medium-term support/resistance line may encourage oil bears to test the strength of the 38.2% Fibonacci retracement level once again.

Very short-term outlook: mixed
Short-term outlook: mixed
MT outlook: mixed
LT outlook: bullish

Trading position (short-term): We do not suggest opening long positions yet. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

Thank you,
Nadia Simmons