May WTI Has to Hold $113.35 to Sustain Upside Momentum

U.S. West Texas Intermediate crude oil futures are edging lower after posting a volatile two-sided trade earlier in the session on Thursday.  After hitting its highest level in more than two weeks shortly after the opening on worries about tighter supply, the market turned lower as traders reacted to renewed concerns over fresh supply amid prospects of a new Iran deal.

At 09:46 GMT, May WTI crude oil futures are trading $114.68, down $0.25 or -0.22%. This is down from an intraday high of $116.64. On Wednesday, the United States Oil Fund ETF (USO) settled at $81.95, up $3.39 or +4.32%.

The oil market is being supported this week as worries over supply disruptions intensified following Russia’s invasion of Ukraine. Additionally, Russia’s deputy prime minister said oil supplies could be stopped for two months following a report that a major pipeline had to be shut down due to storm damage.

On the bearish side, White House national security adviser Jake Sullivan said on Wednesday the United States and its allies have made progress in Iran nuclear talks but issues remain.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $116.64 will signal a resumption of the uptrend. A move through the main top at $126.42 will reaffirm the uptrend.

A trade through $92.20 will change the main trend to down. This is highly unlikely but the market is up seven sessions from its last main bottom, which puts it inside the window of time for a potentially bearish closing price reversal top.

The short-term range is $126.42 to $92.20. The market is currently trading on the strong side of its retracement zone at $109.31 to $113.35, making it support.

The intermediate range is $85.81 to $126.42. Its retracement zone at $106.12 to $101.32 is another support layers.

The main support is the retracement zone at $94.14 to $86.52.

Daily Swing Chart Technical Forecast

The direction of the May WTI crude oil futures market on Thursday is likely to be determined by trader reaction to $114.93.

Bullish Scenario

A sustained move over $114.93 will indicate the presence of buyers. Taking out the intraday high at $116.64 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for a potential acceleration into the main top at $126.42.

Bearish Scenario

A sustained move under $114.93 will signal the presence of sellers. Taking out the short-term Fibonacci level at $113.35 will indicate the selling pressure is getting stronger. This could trigger a break into the short-term 50% level at $109.31.

If $109.31 fails then look for the selling to possibly extend into the intermediate retracement zone at $106.12 to $101.32. Since the main trend is up, buyers could step in on a test of this area.

Side Notes

Due to the prolonged move up in terms of price and time, a close below $114.93 will form a closing price reversal top. This won’t change the main trend to down, but if confirmed, it could trigger the start of a 2-3 day correction.