Crude Oil Price Update – Failure to Hold $70.83 Could Trigger Break into $67.73 – $66.48

U.S. West Texas Intermediate crude oil futures are edging lower early Wednesday as investor book profits following two days of solid gains. Renewed concerns over the Omicron coronavirus variant and its potential impact on the global economy and fuel demand are two of the catalysts capping gains. Traders are primarily awaiting scientific data on whether vaccines are effective against the variant.

Sellers could return if the data shows vaccines are ineffective against Omicron. The rally is likely to continue if the reports predict only a mild outbreak.

At 06:32 GMT, January WTI crude oil futures are trading $71.72, down $0.33 or -0.46%. On Tuesday, the United States Oil Fund (USO) ETF settled at $51.61, up $1.10 or +2.18%.

In other news, the American Petroleum Institute (API) reported that U.S. crude stocks fell during the week-ending December 3, while gasoline and distillate inventories rose. Later today at 15:30 GMT, the Energy Information Administration (EIA) is expected to report a draw of 1.5 million barrels. This would represent a second straight weekly decline.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the confirmation of the closing price reversal bottom on December 2.

A trade through $79.23 will change the main trend to up. A move through $62.43 will negate the chart pattern and signal a resumption of the downtrend.

The short-term range is $79.23 to $62.43. The market is currently trading inside its retracement zone at $70.83 to $72.81.

The main range is $83.83 to $62.43. Its retracement zone at $73.13 to $75.66 is potential resistance.

Combining these two retracement zones creates a potential resistance cluster at $72.81 to $73.13. This zone stopped the rally at $73.03 on Tuesday.

The new minor range is $62.43 to $73.03. Its retracement zone at $67.73 to $66.48 is the nearest support area.

Daily Swing Chart Technical Forecast

The direction of the January WTI crude oil market on Wednesday is likely to be determined by trader reaction to $71.28.

Bearish Scenario

A sustained move under $71.28 will indicate the presence of sellers. This could trigger a break into $70.83.

Taking out $70.83 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the minor retracement zone at $67.73 to $66.48.

Bullish Scenario

A sustained move over $71.28 will signal the presence of buyers. This could trigger a rally into $72.81 – $73.13.

Overtaking $73.13 will indicate the buying is getting stronger. This could trigger an acceleration into $75.66.

Side Notes

Since the main trend is down, sellers are showing respect for the retracement zones at $70.83 to $72.81 and $73.13 to $75.66. They are trying to form a potentially bearish secondary lower top. If successful then we could see a test of $67.73 to $66.48.

In order to create a strong upside bias, buyers are going to have to overcome $75.66 with conviction.