Oil firms further after report on China boosting reserve purchases

Technical Analysis

Author: Justin Low | oil

Oil is up by 7% on the day to $21.75

WTI 02-04
The report is a bit timely to help with further short covering after price action flirted with another potential firm drop below the $20 level in overnight trading.

For now, that remains the key line in the sand for oil as the global backdrop continues to stay more subdued. But at least for today, there is one piece of good news to fall back on.

That said, this will continue to just prove to be a brief and temporary reprieve for oil as the fundamentals continue to hit hard and dampen any optimism.

WTI 02-04
The previous time oil dipped just under $20 briefly on 20 March, it ran back up to $25 on further short covering before falling back again as seen over the past week.

There is some minor resistance around $21.75 to $21.89 currently, but beyond that we could see more shorts covered until the $25 level again.

But as long as the outlook remains just as bleak as it is now, there is little reason for oil to sustain solid gains in the bigger picture.

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