Crude Oil Price Update – WTI Breakout over Contract High Puts $130.50 on Radar

U.S. West Texas Intermediate crude oil futures are trading sharply higher early Tuesday on the back of bullish news out of Europe. The catalyst fueling the rally is the European Union’s agreement to slash oil imports from Russia. Traders are now bracing for tighter supply amid rising demand ahead of peak U.S. and European summer driving season. It appears to be a perfect setup for bullish traders.

At 05:28 GMT, July WTI crude oil futures are trading $118.66, up $1.49 or +1.27%. This is down slightly from the intraday high of $118.97. On Friday, the United States Oil Fund ETF (USO) settled at $85.43, up $0.84 or +0.99%. If prices remain elevated then look for a gap opening.

The Key Bullish Events

The EU agreed in principle to cut 90% of oil imports from Russia by the end of 2022. This should tighten already tight global supplies.

The reopening of China is also underpinning prices. Traders are betting on a surge in demand from China after the easing of COVID-19 curbs.

Adding further to the bullish supply/demand situation are expectation of increased demand for crude oil products like heating oil and gasoline. Demand for the latter is expected to surge over the near-term due to the start of the summer driving season in the United States and Europe.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $118.97 will signal a resumption of the uptrend. A move through the June WTI contract high at $121.17 will reaffirm the uptrend. A move through $103.24 will change the main trend to down.

The minor trend is also up. A trade through $108.61 will change the minor trend to down. This will also shift the momentum.

The nearest support is a trailing minor pivot at $113.79. This is followed by a second trailing pivot at $111.11.

Daily Swing Chart Technical Forecast

Trader reaction to $115.07 is likely to determine the direction of the July WTI crude oil futures contract on Tuesday.

Bullish Scenario

A sustained move over $115.07 will indicate the presence of buyers. A sustained move over the March 7 top at $116.43 will indicate the buying is getting stronger. This could trigger a further rally into $121.17. Overtaking this level could lead to an expansion of the rally into the May WTI contract high at $126.42.

Bearish Scenario

A sustained move under the former top at $116.43 will signal the presence of sellers. Crossing to the weak side of $115.07 will erase this week’s gain with the next potential targets a pair of pivots at $113.79 and $111.11.

Side Notes

We’re using the near-term futures market highs from March 7 as our potential targets. They range from $121.17 to $130.50.