Strongest Month In History For WTI Crude Oil

WTI crude oil closed May with its best month in history. Prices rallied by 88%, taking values above $35.00 for the first time since February. As we roll into June trade, it appears that demand is returning to the energy markets as the global economy attempts a post-COVID-19 restart. 

This week’s close of $35.32 for July WTI is a far cry from what we saw in April. At one point, crude oil famously plunged to values in the area of $-35.00 per barrel; now, the momentum has completely reversed. Production cuts, a COVID-19 restart, and the late-spring/summer buying seasonality are all driving bids to the markets. 

So, how high can WTI go? Technically, there is a GAP in July WTI futures from $46.14 to $37.64. And, as a general rule, GAPs are eventually filled in. At this point, it looks like a sure bet that early June is going to bring a test of the July WTI crude oil GAP area.

July WTI Crude Oil Has An Epic May

While the big story of May was the rally in crude oil, the spike in certain energy mid-cap stocks wasn’t too bad either. Of course, picking stocks is a bit different than trading a commodity; debt loads, operational efficiency, and corporate structure have a great deal to do with valuations. However, for oil field services giant Halliburton (HAL), May brought robust optimism.

HAL stock put on a solid bull run for May. Prices rallied from an open of $8.50 per share to a close of $11.75 ― a gain of 38.2%. The steady uptick was the catalyst for filling in the March HAL GAP from $12.75-$9.74. Moving forward, there are few key levels worth watching in HAL:

• Resistance(1): 38% Retracement, $12.31
• Resistance(2): Bollinger MP, $13.71
• Support(1): Spike Low, $4.25

Overview: While many in the energy sector expect the WTI crude oil bull run to fizzle, I’m not so sure. Given the current set of fundamentals, it appears that prices are due to test the $40.00 handle sooner rather than later. If the COVID-19 reopen goes relatively smoothly, and OPEC+ keeps its production cut commitments, then there is no reason why WTI can’t establish an intermediate-term level of fair value between $45.00-$50.00.