April WTI Reaction to $108.98-$103.90 Sets Near-Term Path

U.S. West Texas Intermediate crude oil futures are trading sharply lower late in the session on Wednesday after the United Arab Emirates (UAE) said it would support boosting supply into a market in disarray because of supply disruptions caused by sanctions imposed on Russia after it invaded Ukraine.

At 20:22 GMT, April WTI crude oil futures are trading $109.71, down $13.99 or -11.31%. This down from an intraday high at $126.84 and up from its intraday low of $103.63. The United States Oil Fund ETF (USO) is at $74.86, down $10.57 or -12.37%.

“We favor production increases and will be encouraging OPEC to consider higher production levels,” Ambassador Yousuf Al Otaiba said in a statement tweeted by the UAE Embassy in Washington.

The news is a potentially bullish game changer especially if it encourages other OPEC members to increase production. According to reports, the UAE can probably bring about 800,000 barrels per day to the market almost immediately. This could be enough to put a short-term cap on prices and create a volatile rangebound trade.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $130.50 will signal a resumption of the uptrend. A move through $87.46 will change the main trend to down.

The minor trend is also up. A trade through $90.06 will change the minor trend to down. This will shift momentum to the downside.

The market found resistance at $130.50 earlier in the week inside the long-term retracement zone at $110.28 to $136.92.

It found support earlier today at $103.63, following a test of the short-term retracement zone at $108.98 to $103.90.

The new minor range is $130.50 to $103.63. Its retracement zone at $117.07 to $120.25 is a potential upside target.

Short-term Outlook

The price action on Wednesday suggests the April WTI crude oil futures contract may become rangebound as traders assess the impact of the UAE’s offer to pump more crude oil on global supply.

This would make $108.98 to $103.90 support and $117.07 to $120.24 new resistance.

Look for a choppy trade on both sides of the long-term 50% level at $111.45.

However, the upside bias is likely to resume on a sustained move over $111.45 with $117.07 to $120.24 the next target.

A downside bias could develop on a sustained move under $111.45.