Crude Oil Price Update – Big Surge Fueled by Tight Supply, Weaker US Dollar

U.S. West Texas Intermediate crude oil futures jumped more than 5% on Friday on the back of a looming European Union embargo on Russian energy products and speculation that China may ease on some COVID restrictions.

Uncertainty around future interest rate hikes by the Federal Reserve and a weaker U.S. Dollar also fueled the strong rally.

On Friday, December WTI crude oil futures settled at $92.61, up $4.44 or +5.04%. The United States Oil Fund ETF (USO) finished at $76.83, up $3.54 or +4.83%.

Looking ahead, the bullish factors – the OPEC+ output cuts and the EU embargo of Russian oil – are going to keep conditions tight on the supply side. That should help underpin prices. A price boost could come from a sharp drop in the U.S. Dollar.

The volatility will be to the downside. China may decide to strengthen its COVID curbs following reports of a huge surge in new cases.

The point is that while a decision from China about relaxing its COVID restrictions will be supportive, the market really doesn’t need it right now to stabilize prices. The wildcard is a U.S. recession and so far the data isn’t supporting that notion yet.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Friday when buyers took out the October 10 main top at $92.34. A trade through $85.30 will change the main trend to down.

The minor trend is also up. A trade through $87.60 will change the minor trend to down. This will shift momentum.

On the upside the major target is the long-term 50% – 61.85 zone at $93.24 to $97.38.

On the downside, the nearest support is the 50% level at $89.09.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at $93.24 is likely to set the tone early Monday.

Bearish Scenario

The inability to overcome and sustain a rally over $93.24 will indicate the presence of sellers. If this creates enough near-term momentum then look for a minimum pullback into the minor pivot at $89.09.

Bullish Scenario

A sustained move over $93.24 will signal the presence of buyers. If this continues to generate enough upside momentum then look for an eventual drive into the long-term Fibonacci level at $97.38.