Traders appear to be shrugging off worries about strategic petroleum releases from major oil consuming countries after several days of weakness.
U.S. West Texas Intermediate crude oil futures are moving higher on Tuesday on renewed supply fears and as Shanghai’s relaxation of some COVID-19 restrictions eased concerns about Chinese demand.
At 14:01 GMT, May WTI crude oil futures are trading $99.65, up $5.36 or +5.68%. The United States Oil Fund is at $75.27, up $2.97 or +4.11%.
Traders appear to be shrugging off worries about strategic petroleum releases from major oil consuming countries after several days of weakness, while shifting their focus to a warning from OPEC that it would be impossible to replace potential supply losses from Russia.
Also supporting the intraday strength are reports that the European Union is preparing to slap an embargo on Russian oil. Meanwhile on the demand front, Shanghai said on Monday that more than 7,000 residential units had been classified as lower-risk after reporting no new infections for 14 days and districts have since been announcing which compounds can be opened up.
The big question that needs to be answered is whether the market has already discounted the “new” strategic oil supply from the United States and other major oil consumers. If this is true then prices can turn higher rather quickly on any bullish news because that story had the potential to become a major bearish event.
The main trend is down according to the daily swing chart. A trade through $92.93 will signal a resumption of the downtrend. A move through $105.59 will change the main trend to up.
The major support is a long-term retracement zone at $94.14 to $86.52. It stopped the selling at $92.93 on Monday and at $92.20 on March 15.
On the upside, the first resistance target is the intermediate Fibonacci level at $101.32, followed by the 50% level at $106.12.
If the main trend changes to up, then the short-term retracement zone at $109.31 to 113.35 will become the primary target area.
Look for an upward bias on a sustained move over $94.14. Since the main trend is down, sellers could come in on the first test of $101.32. Overcoming it, however, could trigger a surge into the $105.59 main top and the 50% level at $106.12.
A failure to hold $94.14 will be a sign of weakness. Taking out the minor bottom at $92.93 will indicate the selling pressure is getting stronger. If sellers can take out $92.20 then look for a possible extension of the weakness into $86.52.
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.