Crude oil jump 1.30% – Expect To Gain In Near Future

Crude oil witnessed more than one percent intraday gains on Tuesday as the dollar slid, while investors debated the potential impact to energy supply and demand from Hurricane Idalia set to hit Florida this week.

The U.S. dollar index dropped on Tuesday after data showed that U.S. job openings, a measure of labor demand, fell in July. Softness in the labor market could encourage the Federal Reserve to slow down interest rate hikes.

Meanwhile, Hurricane Idalia is expected to strengthen into a major hurricane with maximum sustained winds of 125 miles per hour (201 kilometers per hour) before hitting the northwest coast of Florida early on Wednesday, according to the U.S. National Hurricane Center (NHC).

The hurricane will likely impact fuel distribution systems and hit fuel consumption in the affected regions just ahead of the Labor Day federal holiday on Sept. 4, said Mizuho analyst Robert Yawger.

Production was continuing at Chevron-operated Gulf of Mexico oil and gas facilities.

While Idalia does not pose a major supply risk, it does point to a rising risk of potential future outages in the Gulf of Mexico in what is expected to be a busy hurricane season, Yawger noted.

Meanwhile, U.S. energy firms cut the number of active oil rigs for a ninth month in a row, according to industry data released on Friday, indicating that crude oil output could slow down in the country over the coming months.

Technical Outlook

On the above chart, prices gave up a strong breakout at 6720 and formed a long bullish candlestick. Further, RSI 14 and its 9 SMA is giving a bullish crossover.

Both technical aspects indicate bullish momentum in the near future. And a break above 6780 above it could test 6850-6950 very soon.

On the downside, crucial support is seen at 6550 and a break below only prices may retreat towards 6400 and below.

Traders may go long above 6780 levels, or wait for a dip towards 6650-6660.

Further, Crude Oil Inventories due to release at 8.00pm, which will have a volatile impact on the prices.