Oil faces a key moment on the charts to start the week
The delta variant is presenting a fresh risk to the oil demand outlook and that is starting to weigh more heavily on oil prices over the past few weeks.
In particular, tighter restrictions in China is a major cause for concern and we are starting to see oil pull back further to test the confluence of key support levels just above $67.
The 100-day moving average (red line) and key trendline support (white line) sits in the region of $67.15-24 and we are seeing price track below that today in a 2% drop to $66.94 currently as we look towards European morning trade.
A daily break below those levels will spell some danger for oil as the bias turns less bullish and more neutral. I'd pin the July lows @ $65.11-60 as the key line of defense in the short-term and a break below that brings about a different ballgame to oil prices.
From a technical perspective, oil hasn't traded below - at least significantly - its key daily moving averages since November last year.
That is the sort of technical indication that has supported the bullish momentum alongside the strong fundamentals this year. But that is being challenged right now and it is something to be wary about, even if you're a long-term oil bull.
I still think the tighter market will pull oil prices higher in 6-12 months but there's every possibility that we could see a sharper retracement still in the short-term as technical and fundamental concerns start to rear their head for the time being.