Crude Oil Price Update – Holding $77.85 Could Generate the Upside Momentum Needed to Challenge $80.72

U.S. West Texas Intermediate crude oil futures are trading higher late in the session Thursday, holding on to most of its gains throughout the session, on escalating unrest in OPEC+ oil producer Kazakhstan and supply outages in Libya.

At 20:44 GMT, March WTI crude oil futures are trading $78.90, up $1.43 or +1.85%. The United States Oil Fund ETF (USO) is at $56.90, up $1.47 or +2.65%.

According to reports, Russia sent paratroopers into Kazakhstan to help quell a countrywide uprising after deadly violence spread across the tightly controlled former Soviet state. Additionally, in Libya, oil output was at 729,000 barrels per day, the National Oil Corp said, down from a high of more than 1.3 million bpd last year, owing to maintenance and oilfield shutdowns.

After weeks of worrying about the Omicron coronavirus variant’s impact on demand, traders have made a bullish shift to the supply side of the market. Although there were no indications that oil production in Kazakhstan has been affected so far, speculators are already placing bets that some of the country’s production of 1.6 million barrels of oil per day could be limited if the situation escalates further.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $79.56 will signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor range is $74.01 to $79.56. Its 50% level or pivot at $76.79 is the nearest support.

If the main trend changes to down then look for the selling to possibly extend into the main retracement zone at $73.59 to $71.39. This area is controlling the near-term direction of the market.

Short-Term Outlook

The price action suggests there is enough upside momentum to extend the rally into the October 26 contract high at $80.72. A further escalation of the events in Kazakhstan, leading to lower supply, could be the catalyst that drives the market through $80.72 and into a multi-year high.

On the downside, a break back under the former top at $77.85 will be the first sign of weakness. A break under $76.79 will indicate the selling pressure is getting stronger and a move through $74.01 will change the main trend to down. However, don’t expect to see a major sell-off until the main 50% level at $71.39 is taken out with heavy selling pressure.