Crude Oil Price Update – Late Surge Fueled by Drop in Dollar after Powell Signals Smaller Rate Hikes

U.S. West Texas Intermediate crude oil futures are up sharply late in the session on Wednesday, boosted by signs of tighter supply and a plunge in the U.S. Dollar. Some traders are citing optimism over a Chinese demand recovery as another reason for the price rise although unrest over COVID restrictions could tarnish this outlook.

Capping gains, the OPEC+ decision to hold its Dec. 4 meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.

At 20:38 GMT, January WTI crude oil is at $80.62, up $2.42 or +3.09%. The United States Oil Fund ETF (USO) is at $70.26, up $1.92 or +2.81%.

On the support side, prices were underpinned after the U.S. Energy Information Administration (EIA) reported that U.S. crude stocks plunged by nearly 13 million barrels, the most since 2019, in the week ended Nov. 25.

The weaker U.S. Dollar is also bullish for crude oil. The greenback fell late in the session after Fed Chairman Jerome Powell signaled a slower pace for rate hikes. Foreign demand tends to rise when the greenback declines because crude oil is a dollar-denominated commodity.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher following Monday’s closing price reversal bottom.

A trade through $73.60 will reaffirm the downtrend. A move through $92.53 will change the main trend to up.

The minor trend is also down. A trade through $82.36 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, the market is trading on the strong side of a long-term retracement zone at $78.72 to $72.31, making it support.

On the upside, the nearest resistance is a pair of 50% levels at $83.07 and $84.43.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at $78.72 is likely to determine the direction of the January WTI crude oil futures contract into the close on Wednesday.

Bullish Scenario

A sustained move over $78.72 will indicate the presence of buyers. If this created enough upside momentum late in the session then look for a surge into the resistance cluster at $83.07 – $84.43.

Bearish Scenario

A sustained move under $78.72 will signal the presence of sellers. This could trigger a quick break into a minor pivot at $77.49. If this fails then look for a retest of the main bottom at $73.60.