Crude oil holding recent gains

Front-month WTI fell back close to $80 per barrel yesterday before it bounced sharply. This move should be encouraging for bullish investors as it suggests that oil prices may have found a good level of support. If it continues to hold, and if prices now consolidate between $80 and $81, then the bulls could have a launchpad for further gains. This assumes that the pull-back since Friday was enough to blow some froth off the rally which began in early June. If not, and if there’s a break below $80, WTI could then fall back to retest the area between $77.70 and $78.20 as the next significant support level. Yesterday, the US Energy Information Administration reported bigger-than-expected crude and gasoline inventory draws. This helped put a floor under prices. Prices rallied a touch following today’s lower-than-expected CPI release. Headline CPI dropped to 3.0% year-on-year, lower than both the 3.1% expected, and the prior reading of 3.3%. While still significantly above the Fed’s 2% target, this latest drop has raised the probability of two 25 basis point rate cuts before year-end.