TenkoFX - Analytics

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    Oil recovery gains momentum, now approaching $50.00 Haresh Menghani

    Following a sharp slide on Wednesday, WTI crude oil is seen extending its rebound on Thursday led by bullish sentiment surrounding the EU referendum in UK that would decide its membership with the European Union. Currently trading around $49.85/90 band, up around 1.5%, the commodity has managed to recover over 2.5% from Wednesday's low level of $48.38. On Wednesday, the black gold was down over 3.5% at session low before recovering to close around $49.00 region and the fall was triggered by the EIA report that showed a smaller-than-expected decline in the US crude oil inventories. Thursday's rally is led by global optimism that Britons will support to continue the UK's membership with the European Union. However, renewed worries over global supply glut, on the back of a lower-than-expected inventory drawdown, might now restrict any further sharp up-move for the commodity.Moreover, a broad based selling pressure around the greenback is also supporting rally in riskier asset classes – like equities and commodities, including oil. Technical levels to watchSustained momentum above $50.00 psychological mark is likely to assist the commodity back towards June closing highs resistance near $$51.50-60 area, which if conquered seems to set the stage for extension of the near-term upward trajectory towards next major resistance around $53.40-50 area.On the flip side, weakness back below $49.00 mark is likely to drag it back towards $48.30 support, below which the commodity might resume with its near-term corrective move. Below $48.30 support, oil seems vulnerable to drop back to retest last week’s lows support (sub-$46.00 level), with intermediate support pegged around $47.50 and $47.00-$46.80 zone.


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