Oil buyers are putting in a good shift so far to start the week, building off the rebound from last week's low of $62.43.
This comes amid a more positive risk backdrop as investors are brushing aside omicron fears. But one can also argue that the plunge in oil was a bit overdone - technically speaking.
From the peak in October, oil fell by nearly 27% in a little over a month. However you want to put it, that's a steep drop.
One can argue that the move was more or less a retracement of sorts after nine consecutive weeks of gains and while there were hints of technical exhaustion, the omicron variant came at just the right time to give sellers some legs.
So, what's next for oil now?
The latest rebound is encouraging and if anything else, reaffirms buyers' appetite. But that relates more to the constructive view on oil, in that the market is picking up from where it left off pre-omicron.
However, the problem with that is we still have no idea on how omicron is going to affect the outlook.
There are early signs to be optimistic but just like anything in this pandemic saga, one can never be 100% certain. As such, virus fears are still a key consideration going into the early stages of next year.
From a technical standpoint, the bounce is something that buyers can take heart in. The push higher now sees price challenging the 200-day moving average (green line) @ $70.00. Adding to that is a light push above the 200-hour moving average of $70.43, putting buyers back in near-term control.
As such, keep above the $70 and psychologically that is a good platform to build on in the sessions ahead.
All things being equal and if omicron worries are less than feared, I foresee a rapid and strong rebound in oil to perhaps retest the highs in October and early November. But baby steps, we're not out of the woods just yet.
