WTI Oil in Position to Test Support Zone at $100.90 – $98.94

U.S. West Texas Intermediate crude oil futures are trading sharply lower on Tuesday as renewed demand concerns encouraged bullish speculators to exit risky long positions. Driving the price action is the news that the International Monetary Fund (IMF) reduced its economic growth forecast and warned of higher inflation.

At 15:19 GMT, June WTI crude oil is trading $102.70, down $4.91 or -4.56%. The United States Oil Fund ETF (USO) is at $77.20, down $3.21 or -3.99%.

The IMF on Tuesday cut its forecast for global economic growth by nearly a full percentage point, citing Russia’s invasion of Ukraine, and warned that inflation is now a “clear and present danger” for many countries.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $109.20 will signal a resumption of the uptrend. A move through $92.60 will change the main trend to down.

The short-term range is $121.17 to $90.37. Its retracement zone at $105.77 to $109.40 is resistance. This area stopped the buying on Monday at $109.20.

The minor range is $92.60 to $109.20. Its retracement zone at $100.90 to $98.94 is potential support.

The main range is $61.48 to $121.17. Its retracement zone at $91.33 to $84.28 is major support.

Daily Swing Chart Technical Forecast

The direction of the June WTI crude oil futures contract into the close on Tuesday is likely to be determined by trader reaction to $100.90.

Bullish Scenario

A bullish tone could develop late in the session following a successful test of the minor retracement zone at $100.90 to $98.94. Holding above the 50% level at $100.90 will indicate the return of buyers. If this is able to generate enough upside momentum then we could see a retest of $105.77 to $109.40.

Bearish Scenario

A sustained move under $100.90 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to continue into the Fibonacci level at $98.84.

The Fib level at $98.84 is a potential trigger point for an acceleration to the downside with $92.60 the next major target price.

Side Notes

The chart pattern went from potentially bullish to potentially bearish following the release of the IMF report. If another secondary lower top forms at $109.20 then look out to the downside. We could be looking at a near-term break into at least $88.29.