Crude Oil Price Update – $71.39 – $73.59 Retracement Zone Controlling Near-Term Direction

U.S. West Texas Intermediate crude oil futures are inching higher early Tuesday as traders try to claw back yesterday’s losses. Helping to cap gains are investor worries about demand after renewed restrictions were imposed in Europe and Asia amid a rise in coronavirus cases.

At 08:12 GMT, March WTI crude oil futures are trading $71.20, up $0.40 or +0.56%. On Monday, the United States Oil Fund (USO) ETF settled at $51.44, down $0.59 or -1.13%.

Later today at 21:30 GMT, the American Petroleum Institute (API) will release its weekly oil inventories report. It is expected to show a slight rise in oil stocks.

Adding to the confusion over the supply/demand situation, OPEC raised its world oil demand forecast for the first quarter of 2022 and stuck to its timeline for a return to pre-pandemic levels of oil use. Meanwhile, the U.S. Energy Information Administration (EIA) on Monday said supply is expected to increase in January.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $72.82 will change the main trend to up. A move through $62.05 will signal a resumption of the downtrend.

The minor trend is also down. A trade through $72.55 will change the minor trend to up. A move through $69.95 will indicate the selling pressure is getting stronger.

The main range is $80.72 to $62.05. Its retracement zone at $71.39 to $73.59 is resistance. This zone stopped the selling on December 9 at $72.82. It is also controlling the near-term direction of the market.

The short-term range is $62.05 to $72.82. Its retracement zone at $67.44 to $66.17 is the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to $71.39.

Bearish Scenario

A sustained move under $71.39 will indicate the presence of sellers. The first downside target is the minor bottom at $69.95. This price is a potential trigger point for an acceleration to the downside with $67.44 to $66.17 the next likely target.

Bullish Scenario

A sustained move over $71.39 will signal the presence of buyers. This could lead to a labored rally with potential targets coming in at $72.55, $72.82 and $73.59.

The key level to watch is $73.59. If buyers can overcome this level and build a support base, then look for an acceleration to the upside with $77.85 the next major target.