Crude Oil Price Update – In Position to Challenge Major Retracement Zone at $71.39 – $73.59

U.S. West Texas Intermediate crude oil futures finished sharply higher on Tuesday, rebounding on renewed risk appetite the day after a steep tumble. Nonetheless, traders remained cautious as the Omicron coronavirus variant cut holiday travel plans, dimming the near-term fuel demand outlook. Late session strength in the market was also fueled by an industry report showing a larger-than-expected inventory draw for crude oil.

At 02:24 GMT, March WTI crude oil futures are trading $71.28, up $0.46 or +0.65%. On Tuesday, the United States Oil Fund ETF settled at $51.58, up $1.68 or +3.37%.

Late Tuesday, the American Petroleum Institute (API) estimated the inventory draw for crude oil to be 3.670 million barrels. Analyst expectations for the week-ending December 17 were for a smaller draw of 2.633 million barrels.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $65.93 will signal a resumption of the downtrend. A move through $72.82 will change the main trend to up.

The minor trend is also down. A trade through $72.31 will change the minor trend to up and shift momentum to the upside.

The short-term range is $62.05 to $72.82. Its retracement zone at $67.44 to $66.17 is support. This area stopped the selling at $65.93 on Monday.

The minor range is $72.82 to $65.93. The market is straddling its 50% level at $70.90 early Wednesday.

The main range is $80.72 to $62.05. Its retracement zone at $71.39 to $73.59 is the primary downside target. This zone is also controlling the near-term direction of the market. Since the main trend is down, sellers are likely to come in on a test of this area.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the March WTI crude oil market on Wednesday is likely to be determined by trader reaction to a pair of 50% levels at $70.90 and $71.39.

Bullish Scenario

A sustained move over $71.39 will indicate the presence of buyers. This could trigger a labored rally with potential targets a pair of minor tops at $72.31 and $72.55, a main top at $72.82 and a main Fibonacci level at $73.59.

The Fib level at $73.59 is a potential trigger point for an acceleration to the upside with $77.85 a potential upside target.

Bearish Scenario

A sustained move under $70.90 will signal the presence of sellers. This could trigger a break into a minor pivot at $68.68. If this level fails as support then look for the selling to possible extend into the short-term retracement zone at $67.44 to $66.17.