Oil to run to $80bbls and beyond?

• WTI has backed off from the YTD highs and has turned technically bearish.
• WTI fundamentals open risk back to YTD highs and beyond.

Oil prices just hit a 3 1/2-year high on Thursday, with WTI rallying up to $69.50bbls. the price has since buckled and dropped back to test the vicinity of the 10-D SMA at $67.02 with a low today at $67.09 so far. 

The price of oil is a concern for consumers with American businesses saying that they are paying more for other raw materials, pointing to an upsurge in inflation that could hamper U.S. growth if it persists or intensifies. Indeed, signs of higher inflation are popping up all over the place and Manufacturers are expanding at the fastest pace in three years, according to the flash PMI data, all of which points to higher oil for longer. 

What's holding up the bulls?

However, there was a late-session turn lower on Thursday, after the price reached the highest in three-and-a-half-years when the major oil producers who were meeting in Saudi Arabia reportedly said that the market’s global glut of crude supplies has nearly vanished.

For today, the price action has been bearish and making for the largest one-day decline in a week. The sentiment from the end of last week still lingers. At the same time, the US yields and DXY are higher, DXY at the high end of the 90.3200-90.8490 range today and the 10yrs a tough of the highs with the 2.96-3.00% range.  Oil is also on the backfoot due to the news of a higher U.S. rig count late last week, pointing to further growth in domestic crude production.

WTI levels

The price is pressuring the vicinity fo the 10-D SMA with RSI steadily lower below 70 and overbought territory. 66.50 comes as next key support as being the 25th March top while the 21-D SMA falls in below there at 65.45. A break of 69.50 to the upside (2nd Nov 2014 week high/YTD highs) opens a run to $80.00bbls.