Crude oil prices rose to a 7-year high overnight after OPEC and its allies, collectively known as OPEC+, declined to take up a plan that would send more oil into global markets. The oil cartel will instead keep its current pace and release an additional 400k barrels a day in November versus an additional 800k per day, which some analysts expected.

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The price of oil is responding to higher global economic activity as key economies exit strict Covid strategies and instead opt for a more lenient policy amid climbing vaccination rates. A sharp rise in natural gas prices is also helping feed the higher oil prices, as some utility operators switch to oil to produce energy. Natural gas rose nearly 35% in September versus crude oil’s 9.53% gain.

That said, the monstrous rise in natural gas prices helped tee up oil’s rise, and the heating gas looks set to remain in heavy demand. US storage levels for the heating gas remain below the 5-year average, according to the Energy Information Administration (EIA). That, along with increased export demand of liquified natural gas (LNG) from Europe and Asia, is likely to keep prices elevated as the Northern Hemisphere enters the heating season.

Altogether, this puts oil and natural gas on a preset course to move higher in the coming weeks and months, or at least that appears to be the most likely course given the current market fundamentals. Weather trends across the United States, Europe, and Asia will likely drive natural gas prices in the coming weeks. The EIA's inventory report is another key moving into the winter.

Crude Oil Technical Forecast

Crude oil prices are off to a bullish start to October, with gains nearing 4% just four days into the month. That follows a near 10% gain in September. The psychologically imposing 80 handle is in focus with prices near 7-year highs. The former July 2021 high at 76.98 may turn support on the next pullback. RSI is in overbought territory above 70, although MACD is still firmly higher.

Crude Oil Daily Chart

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