Oil prices have jumped unexpectedly, increasing by 6.5% over the past week, surprising many investors. This rise occurs even though the Organisation of the Petroleum Exporting Countries (OPEC) is adding more barrels, with Saudi Arabia planning to increase production by 411,000 barrels per day soon. There’s a potential inverted head-and-shoulders pattern forming, which could indicate a breakout. A key resistance level is at $65, and market charts suggest a quick rise to $70-71 due to short market positioning. Time spreads show a surprisingly bullish trend, fueled by trade optimism. Potential trade agreements with lower tariffs may help oil and other risk assets. Recently, West Texas Intermediate (WTI) crude oil climbed by $1.34 to $64.72, reaching a session high. The sentiment was also influenced by a drop in the Baker Hughes US oil rig count, which decreased by nine, bringing the total to 442. This indicates a rapid decline in active rigs. This sharp increase in oil prices amid rising OPEC supply, especially from Saudi Arabia, creates an unusual scenario in a market many thought was stabilizing. The current market response indicates a shift in trader sentiment and highlights the impact of anticipation and market positioning on short-term trends. Looking at the bullish time spreads, traders seem to expect stronger demand or a tightening supply in the near term. This is significant since the increased output isn’t fully present in the market yet. Right now, it’s more about how the futures market reacts to expectations rather than the physical supply of oil. The potential inverted head-and-shoulders pattern reflects a possible change in trend. With resistance around the $65 point and quick short covering, there’s a chance that prices could rise to $70.71, especially if liquidity and follow-through confirm the breakout. Current positioning in the derivatives market may make it vulnerable to fast upward movements. The decline in the Baker Hughes rig count adds another dimension. A drop of nine rigs in one week suggests producers might be pulling back on new drilling, whether intentionally or not. When one region increases production while another reduces it, it creates perceived scarcity that traders respond to. This situation influences the overall tone of supply uncertainty, which is crucial in such a tightly wound market where sentiment drives volatility. Trade policy optimism is also supporting riskier assets. Headlines about potential tariff reductions and agreements have already influenced price expectations before any official announcements. If expectations for simplified trade routes and lower tariffs continue to grow, short-duration contracts are likely to respond first, before any long-term shifts in production or consumption. Additionally, options activity is leaning towards higher strike prices, indicating that larger holders are hedging against rapid price increases rather than preparing for a downturn. This shift suggests that the balance of fear is changing, although it may be temporary. In markets like this, where price movements occur faster than fundamentals can adjust, taking action often outweighs waiting for clarity. Speed can be rewarding, while hesitation can lead to risks. Although it’s uncertain whether these price levels will hold, the current momentum is significant and shouldn’t be overlooked.

here to set up a live account on VT Markets now