Crude Oil Price Update – Short-Term Direction Determined by $71.39 and $70.90

U.S. West Texas Intermediate crude oil futures retreated on Friday as surging cases of the Omicron coronavirus variant raised fears that new restrictions may hit fuel demand. Additionally, after a series of zigs and zags throughout the week, the market also finished lower for the seventh out of eight weeks.

On Friday, March WTI crude oil futures settled at $70.35, down $1.40 or -1.95%. The United States Oil Fund ETF (USO) finished at $50.74, down $1.13 or -2.18%.

In other news, the U.S. oil rig count, a leading indicator of output, rose in the week, prompting concerns of potential oversupply.

The oil and gas rig count, and early indicator of future output, rose by three to 579 in the week to December 17, energy services firm Baker Hughes Company said in its closely followed report on Friday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $72.82 will change the main trend to down. A move through $68.98 will signal a resumption of the downtrend.

The minor trend is also down. A trade through $72.31 will change the minor trend to up. This will shift momentum to the upside. A move through $68.98 will indicate the selling pressure is getting stronger.

The main range is $80.72 to $62.05. Its retracement zone stopped the buying at $72.82 on December 9, at $72.55 on December 13 and at $72.31 on December 16. This area is controlling the near-term direction of the market.

The minor range is $72.82 to $68.98. The market closed on the weak side of its pivot at $70.90 on Friday, making it additional resistance.

The short-term range is $62.05 to $72.82. Taking out $68.98 could trigger a further break into $67.44 to $66.17.

Short-Term Outlook

The daily chart pattern suggests the key area to overcome is $71.39 to $73.59. The latter is a potential trigger point for an acceleration to the upside.

On the downside, the key area to watch is $67.44 to $66.17.

Aggressive counter-trend buyers could come in on the first test of this area. They will be trying to form a potentially bullish secondary higher bottom.

If the selling is strong enough to take out the short-term Fibonacci level at $66.17 then be prepared for a potential acceleration to the downside. This could lead to a retest of the December 2 main bottom at $62.05.

Side Notes

Based on Friday’s close, the key area to watch early Monday is the pair of 50% levels at $70.90 to $71.39.