Crude Oil Price Update – Needs to Hold $40.25 to Sustain Strong Upside Momentum

U.S. West Texas Intermediate crude oil futures are trading higher for a second session on Tuesday as hopes that a coronavirus vaccine could be available shortly offset the expected negative impact on fuel demand from new restrictions to contain the pandemic.

Despite the positive spin on the vaccine in the headlines, some traders remained skeptical about the rally since mass rollouts of the vaccine are likely to be months away and subject to regulatory approvals.

At 16:26 GMT, December WTI crude oil futures are trading $40.74, up $0.45 or +1.12%.

Prices were also supported by comments from Saudi Arabia’s energy minister, who on Monday said that OPEC and its allies, could tweak their supply pact if demand slumps before the vaccine is available.

Helping to cap gains are the negative impact from renewed lockdowns in Europe, as well as rising Libyan production.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through $41.90 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through $37.06 will change the minor trend to down.

The short-term range is $44.33 to $33.64. The market is currently trading on the strong side of its retracement zone at $40.25 to $38.99, putting it in a bullish position. This area is new support.

The minor range is $33.64 to $41.33. Its retracement zone at $37.48 to $36.57 is support.

Daily Swing Chart Technical Forecast

The early price action indicates the direction of the December WTI crude oil market into the close is likely to be determined by trader reaction to the Fibonacci level at $40.25.

Bullish Scenario

A sustained move over $40.25 will indicate the buying is getting stronger. Taking out the high at $41.33 is likely to drive the market into a pair of tops at $41.90 and $41.74. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $40.25 will signal the presence of sellers. This could lead to a test of the 50% level at $38.99. Counter-trend buyers could come in on a test of this level, but if it fails, we could see the selling extend into at least $37.48.