Outages in Libya and tensions in the Middle East are causing supply concerns. WTI is approaching key resistance at $77.40

Brent, WTI Oil News and Analysis

• Geopolitical uncertainty and supply concerns supported oil
• Oil prices settle ahead of the technical confluence resistance zone
• WTI respects a major long-term level, but geopolitical uncertainty remains
• The analysis in this article uses graphic models and key support and resistance levels. For more information, visit our full the education library

External factors supported the oil market

Oil prices rose amid reports of disruptions to Libya’s main oil fields – a major source of income for the internationally recognized government in Tripoli. Oil fields in the east of the country are said to be under the influence of Libyan military leader Khalifa Haftar, who opposes the government in Tripoli. According to Reuters, the Libyan government led by Prime Minister Abdulhamid al-Dbeibah has yet to confirm any outages, but clearly the threat of damaged oil fields has filtered into the market to support oil prices.

Such uncertainty regarding international oil supplies has been further fueled by the ongoing situation in the Middle East, where Israel and Iran-backed Hezbollah have fired missiles at each other. According to Reuters, a senior US general said on Monday that the danger of a wider war had receded somewhat, but the lingering threat of an Iranian attack on Israel remained a possibility. As such, the oil markets were on edge, which witnessed the sharp rise in oil prices.

Oil prices settle ahead of the technical confluence resistance zone

Oil bulls enjoyed a recent leg higher, following price action from $75.70 a barrel to $81.56. External factors such as supply concerns in Libya and the threat of escalation in the Middle East provided a catalyst for low oil prices.

However, today’s price action points to a potential slowing of the upward momentum, as the commodity fell below the $82 level – the previous high of $82.35 earlier this month. Oil was on a broader downtrend as the global economic outlook remains subdued and estimates of oil demand growth were revised lower as a result.

$82.00 remains the key to bullish continuation, especially given that it coincides with both the 50- and 200-day SMAs – providing confluence resistance. If the bulls can sustain the bullish move, $85 becomes the next resistance level. Support remains at $77.00, the RSI does not provide any particular support as it trades around the mid-range (not approaching either overbought or oversold territory).

Brent crude oil daily chart

Source: TradingView, prepared by Richard Snow

WTI crude is trading in a similar fashion to Brent, rising over the past three trading sessions, only to slow today so far. Resistance occurs at the significant long-term level of $77.40, which can be seen below. Acted as a major support in 2011 and 2013 and a major pivot point in 2018.

Monthly chart of WTI oil

Source: TradingView, prepared by Richard Snow

Immediate resistance remains at $77.40, followed by November and December 2023 highs around $79.77, which have also kept the bulls at bay more recently. Support is $72.50.

WTI Oil Continuous Futures (CL1!) Daily chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX