As expected it was another positive week for crude oil for the WTI August contract which closed at $74.05 per barrel, with bullish sentiment continuing in early trading as the contract trades at $74.14 per barrel at the time of writing. However, in order to gain some longer-term technical perspective on where this bullish trend might run into some headwinds, I would like to consider the monthly chart.

The first note of importance is the platform of support at $66 per barrel and denoted with the red dashed line of the accumulation and distribution indicator. This was the level that proved to be so obstinate in the past but of course, is now important for a different reason as it has provided the springboard for the move higher, and although we are not quite at the month-end, the June candle is solid with no wicks and the volume is as we should expect, so price and volume in agreement. Next, we need to consider the histogram of the volume point of control and the important price level here is at $77 per barrel where the VPOC volume falls away at this point and diminishes further as we approach the $80 per barrel area all the way through to $90 per barrel and beyond. Finally, note the well-developed price resistance at $84 per barrel and denoted with the red dashed line, a key level that marked the end of the 2018 summer rally. So this is significant.

In terms of the fundamentals, last week’s oil inventories for the Cushing hub showed yet another draw of -7.6m bbls against a forecast of -3.6m bbls making this the fifth consecutive week we have seen high demand and falling inventories. A positive event for oil and supported by the US driving season which is now in full swing and with the commodity also getting a boost from any weakness in the US dollar which is all positive for oil bulls.

So where is oil heading now and what are the technical barriers to further price gains? First, we need to see $75 per barrel taken out with confidence as this has proved to be a stumbling block in 2019 and 2020. If this does occur and I believe it will, the next level is to reach the $79/$80 per barrel area where volume declines on the VPOC histogram and from there on to $85 per barrel which is where the potential top may be reached in this rally. And as always the final caveat – the price action must be supported by good volume, rising in the uptrend as we break away from the VPOC itself at $62 per barrel.

(Click on image to enlarge)