On the supply side, OPEC and its allies are having trouble fulfilling a pledge to increase output because of a lack of capacity in many producers.
U.S. West Texas Intermediate crude oil futures inched higher on Monday in a volatile session that saw the U.S. benchmark rebound from a four-day low. At the end of the session, traders said it was concerns over tight global supplies that outweighed worries that demand would be pressured by a flare-up in COVID-19 cases in Beijing and more interest rate hikes, driving the recovery.
On Monday, August WTI crude oil settled at $118.25, up $0.13 or +0.11%. The United States Oil Fund ETF (USO) finished at $90.34, up $0.21 or +0.23%.
On the supply side, according to Reuters, OPEC and its allies are having trouble fulfilling a pledge to increase output because of a lack of capacity in many producers, sanctions on Russia and unrest in Libya that has slashed output.
Meanwhile, prompting demand concerns, Beijing’s most populous district Chaoyang announced three rounds of mass testing to quell a “ferocious” COVID-19 outbreak.
The main trend is up according to the daily swing chart. However, momentum is trending lower.
A trade through $120.75 will signal a resumption of the uptrend. The main trend changes to down on a trade through $100.66.
The minor trend is down. It changed to down on Monday when sellers took out the minor bottom at $115.04. This move shifted momentum to the downside.
The first minor range is $120.75 to $114.90. Its pivot comes in at $117.83.
The next two minor support levels come in a $114.85 and $113.35. The short-term retracement zone at $110.71 to $108.33 is the support zone propping up the market.
Trader reaction to the pivot at $117.83 is likely to determine the direction of the August WTI crude oil market early Tuesday.
A sustained move over $117.83 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the main top at $120.75. Overtaking this level could lead to a quick test of the June contract high at $121.17, followed by the July contract high at $123.18.
A sustained move under $117.83 will signal the presence of sellers. This could trigger a steep plunge into the support cluster at $114.90 – $114.85, followed by $113.35.
Taking out $113.35 will indicate the selling pressure is getting stronger with the short-term retracement zone at $110.71 – $108.33 the next target zone.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.