WTI Price Analysis: Oil eyes record monthly surge

• WTI looks set to end May with 76% gains. 
• OPEC+ deal and easing of coronavirus restrictions likely powered big gains. 
• Monthly chart shows a bullish reversal candlestick pattern.

While West Texas Intermediate (WTI) crude's front-month contract has backed off from the 2.5-month highs reached earlier this week due to deteriorating US-China tensions, it is still on track to post its biggest monthly gain on record. 

At press time, WTI oil is trading at $33.30, representing a 1.22% drop on the day, having hit a high of $34.81 on Tuesday. That was the highest level since March 11. 

More importantly, at current prices, the black gold is reporting a month-to-date gain of 76% – the biggest single-month percentage gain on record. 

The rally could be associated with the OPEC+ deal to cut output by 9.7 million barrels per day, which came into effect from May 1. OPEC+ is a group of major producers led by Russia and Saudi Arabia.  Also, optimism stemming from the gradual easing of coronavirus restrictions across the globe boded well for oil. 

From a technical analysis perspective, May's staggering gains have confirmed a bullish reversal pattern on the monthly chart. Moreover, the 76% rise seen in this month marks a strong follow-through to the seller exhaustion signaled by April's long-tailed spinning bottom candle. 

The bullish reversal candlestick pattern indicates the path of least resistance is now to the higher side. That does not necessarily imply a V-shaped rally to highs above $65 observed in early January. Prices can trade in the sideways manner within May's trading range of $34.81 to $18.05 before returning to levels seen in January. A drop to levels below $30 may be seen if the US responds to China's decision to curb Hong Kong's autonomy by imposing sanctions. 

Monthly chart

Trend: Bullish

Technical levels

R3 37.98
R2 36.16
R1 34.97
PP 33.15
S1 31.96
S2 30.14
S3 28.95