Oil steady as buyers eye a bigger breakout to the topside

WTI trades up 0.2% to $77.80 on the day

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The $78 level poses some light psychological resistance for oil but essentially, it is all about the ability for buyers to keep the upside momentum running after the break to its highest levels since 2014 in trading yesterday.

OPEC+ maintained its output policy and that spurred a round of heavy bids in oil prices, sending it above the 2018 high @ $76.90 and this year’s previous high of $76.98.

Buyers are still building on that break and I’d argue that if we can keep afloat over the next few sessions, a potentially bigger breakout beckons for oil.

$80 would be the next big target but amid the energy crisis hype, oil is an indirect beneficiary and it will be tough to contain the upside propensity if the situation globally continues to worsen i.e. gas prices soar even higher from the already record levels.

Looking at crude oil fundamentals, things are still holding up well as demand conditions are likely to improve further going into next year as the pandemic is seen subsiding in most parts of the world (travel reopening would only bolster sentiment further).

The risks and uncertainties related to the pandemic are still going to be ever present but at this stage, it is unlikely that we will see major economies revert back to tighter restrictions again unless there are new developments to the COVID-19 spread.

Supply conditions will depend largely on OPEC+ control as even shale producers are keeping rather disciplined and more timid this time around amid the surge in prices.

As such, with OPEC+ still not really looking to flood the market with more supply, the bullish sentiment is being maintained for now until somebody says “boo”.