May WTI Oil Forms Potentially Bearish Secondary Lower Top

U.S. West Texas Intermediate crude oil futures are edging lower early Tuesday, weighed down as Ukraine and Russia headed for peace talks and on fears of a drop in fuel demand in China after the financial hub of Shanghai shut down to curb a surge in COVID-19 cases.

At 05:11 GMT, May WTI crude oil is at $104.51, down $1.45 or -1.37%. On Monday, the United States Oil Fund ETF (USO) settled at $74.57, down $6.17 or -7.64%.

Ukraine and Russia were set to meet in Istanbul on Tuesday for their first peace talks in over two weeks. Prices are down because an end to the war could lead to the easing of sanctions or avoidance of Russian oil by the West.

Meanwhile, Shanghai’s two-stage lockdown over nine days is expected to hit fuel demand in China, the world’s largest oil importer.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on March 24. Furthermore, a potentially bearish secondary lower top has formed.

A trade through $116.64 will negate the chart patterns and signal a resumption of the uptrend. The main trend will change to down on a trade through $92.20.

The minor range is $92.20 to $116.64. The market is currently straddling its pivot at $104.42.

On the upside, resistance is a 50% level at $106.12, a 50% level at $109.31 and a Fibonacci level at $113.35.

On the downside, support is a 50% level at $104.42 and a Fibonacci level at $101.32.

The Fib level at $113.35 is a potential trigger point for an acceleration to the upside. The Fib level at $101.32 is a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

The direction of the May WTI crude oil market on Tuesday is likely to be determined by trader reaction to the pivot at $104.42.

Bullish Scenario

A sustained move over $104.42 will indicate the presence of buyers. The first upside target is $106.12. Over taking this level will indicate the buying is getting stronger with $109.31 the next level. This is a potential trigger point for an acceleration into $113.35.

Bearish Scenario

A sustained move over $104.42 will signal the presence of sellers. The first downside target is $101.32. This level is a potential trigger point for an acceleration to the downside with the major 50% level at $94.14 the next target. This is the last potential support before the $92.20 main bottom. Taking out this level will change the main trend to down.