Crude oil has been extremely bullish for about 19 months now, since it reversed from the grave in April last year. US WTI Crude Oil climbed more than $120 without going through any dips in summer this year, as the global economy softened, and China entered into another phase of the coronavirus pandemic. But it doesn’t seem like we will see major restrictions in Europe and the US, which has turned the sentiment towards oil positive.

The recent surge in energy prices has helped to maintain the bullish sentiment in oil. We have seen normal bullish momentum in gas and other energy prices, but the hype in the media and politics has been immense, making it seem like this would be the end of the fossil fuel, which has kept the sentiment positive in the industry.

Besides that, OPEC+ countries decided to increase the supply in summer, but the increase has been slow, and this month, it dropped below the quotas that were imposed. As my colleague Ash wrote earlier today “According to latest data from Reuters, OPEC’s oil output through the month of October came in below the planned levels, on account of involuntary outages among some of the smaller oil producers in the group. Despite leading suppliers Saudi Arabia and Iraq pumping more oil, the total output from OPEC came in at 27.5 million bpd last month, 190k bpd higher than in September. However, the rate of increase was well below the proposed 254k bpd increase the group had previously agreed on.”

Buy stop order at the 20 SMA in WTI Oil

However, after such a run, there has been some exhaustion to the upside momentum, but buyers are not exactly letting up either, as they kept up the defense at the recent lows around $80.79 last week, before seizing near-term control again, on a push above its key hourly moving averages.

The $85 mark still poses a modest resistance point on the daily chart shown above, but the fundamentals continue to look solid for oil, as we look towards next year. A Bloomberg report highlighted that China’s stockpiles are down to their lowest since February 2020, and that creates more headaches for local authorities, who are already needing to deal with the power crunch, amid shortages of coal and natural gas.

As such, this could result in state enterprises coming in to replenish inventories, even with the prices at elevated levels i.e. underscoring the added demand for crude stocks. OPEC+ will also be meeting later this week, so there’s that to factor into consideration, but I doubt the bloc will do much to shake up the status quo for the time being.

US WTI Crude Oil