Oil Rally Pauses as G7 Reserve Talk Caps War-Driven Surge

Crude oil has seen a massive gap to the upside this week, and at one point traded more than 25 percent above Friday’s levels. Price has already reached the 78.6 percent retracement area and we have seen some pullback after reports that several G7 countries are considering releasing oil reserves. However, this impact may only be temporary. 

It is still unclear whether the current retracement back toward the Sunday gap around 92 to 95 will be only a temporary move, possibly a wave four pullback, or if the market will now start moving sideways. 

At this stage it is not easy to be very precise, but the 92 to 95 area clearly stands out as very strong support. If the situation in the Middle East does not improve soon and energy prices remain under pressure to the upside, then holding above this support zone could open the door for another strong rally. In that case, crude oil could later aim toward the 130 area.