May WTI Oil Trading on Strong Side of Key Retracement Zone

U.S. West Texas Intermediate crude oil futures are at their high of the week on Wednesday, underpinned by supply delivery concerns in Russia and a drop in U.S. inventories according to a private industry group. Traders are also awaiting the release of the weekly U.S. government inventories report at 14:30 GMT. It is expected to show a drawdown.

At 13:22 GMT, May WTI crude oil futures are trading $113.36, up $4.09 or +3.74%. The United States Oil Fund ETF (USO) is expected to open higher. On Tuesday, it settled at $78.58, down $0.96 or -1.21%.

Oil prices are being supported by a disruption of Russian and Kazakh crude exports via the CPC pipeline. Additionally, the latest data from the American Petroleum Institute (API) showed U.S. crude stocks fell by 4.3 million barrels for the week-ended March 18.

The U.S. Energy Information Administration (EIA) report is expected to show a drawdown of about 700,000 barrels of crude oil.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend resumed on Wednesday when buyers took out yesterday’s high, negating the potentially bearish closing price reversal top.

A trade through $92.20 will change the main trend to down. A move through $126.42 will reaffirm the uptrend.

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

Additional support is the retracement zone at $106.12 to $101.32.

Daily Swing Chart Technical Forecast

The direction of the May WTI crude oil futures contract is likely to be determined by trader reaction to the retracement zone at $113.35 to $109.31.

Bullish Scenario

A sustained move over $113.35 will indicate the presence of buyers. This is a potential trigger point for an acceleration to the upside with $126.42 the next major upside target.

Bearish Scenario

A sustained move under $113.35 will indicate the buying is weakening. This could lead to a test of the 50% level at $109.31. A failure to hold this level will signal the presence of sellers. This could trigger an acceleration into $106.12 to $101.32.

Side Notes

As mentioned earlier in the week, trader reaction to $109.31 to $113.35 will determine the near-term direction of the May WTI crude oil futures contract.

A sustained move over $113.35 could trigger an acceleration to the upside.

A sustained move under $109.31 will indicate that aggressive counter-trend are trying to form a potentially bearish secondary lower top.