Big Challenge for WTI Bulls on Test of $94.14 – $86.52

U.S. West Texas Intermediate crude oil futures are trading lower Monday, weighed down by plans to release record volumes of crude and oil products from the strategic reserves of several major oil consuming countries, and on continuing COVID-19 lockdowns in China, which could limit demand.

At 11:31 GMT, May WTI crude oil is trading $94.05, down $4.21 or -4.28%. On Friday, the United States Oil Fund ETF (USO) settled at $74.12, up $1.01 or +1.38%.

Last week, the International Energy Agency (IEA) member nations announced they will release 60 million barrels over the next six months, with the United States matching that as part of its 180 million barrel release announced in March, according to Reuters.

Meanwhile, with China implementing a “zero tolerance” policy for COVID-19, demand for oil will likely be affected.

Both events have prompted several major analysts to lower revisions in previous price estimates. Bank of America maintained its forecast for Brent crude to average $102 a barrel for 2022-23, but it cut its summer spike price to $120. Swiss investment bank UBS also lowered its June Brent forecast by $10 to $115 a barrel.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the main bottom at $92.20 will reaffirm the downtrend. The main trend will change to up on a trade through $105.59.

The main range is $61.86 to $126.42. The market is currently testing its retracement zone at $94.14 to $86.52. This zone is controlling the longer-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the May WTI crude oil market on Monday is likely to be determined by trader reaction to $94.14.

Bearish Scenario

A sustained move under $94.14 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into the main bottom at $92.20.

Taking out $92.20 will not only reaffirm the downtrend, but it could also trigger an acceleration into the long-term Fibonacci level at $86.52.

Bullish Scenario

A sustained move over $94.14 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into $98.26.

Overtaking $98.26 will put the market in a position to post a closing price reversal bottom. This could trigger a surge into the long-term Fibonacci level at $101.32.