Oil bulls are not throwing in the towel just yet and the latest dribble lower was quickly bought up as we see a test of yesterday's low come into play:
There are solid structural reasons to expect oil to outperform moving forward and that will keep the bullish conviction in the commodity running for some time.
For one, the market outlook looks to be one that would be tighter than expected and even more so as the world starts to normalise and global air travel resumes - especially in Asia Pacific. Adding to that is the underinvestment in the sector and the continued shift towards green energy, which should lead to infrastructure deficit and raw material shortages. That's a recipe for a commodities boom.
However, for now, there are some near-term headwinds to deal with.
The geopolitical tensions between Russia and Ukraine is the obvious one alongside the Iran nuclear deal fiasco. Those have short-term repercussions but have lingering potential depending on how long it takes to resolve said issues.
As such, for me, I see the fact that oil has gained for seven consecutive weeks as being more of a key trigger for some form of retracement or correction. The other two factors above are more or less convenient "excuses".
Looking at the charts, oil buyers are not giving up just yet but I reckon a pullback towards $84 to $85 and potentially towards the 38.2 retracement level of the recent swing higher @ $81.40 as being a good opportunity to scale in on more long positions.
In a sense, a pullback of sorts would be a "healthy" one. We'll see if that comes into play. For now though, dip buyers are clearly not giving up that easily just yet as noted above.
