WTI Oil: Main Trend Up, Momentum Down Creating Choppy Trade

U.S. West Texas Intermediate crude oil futures are trading higher on Tuesday as traders try to claw back yesterday’s steep losses. The catalysts behind the move are worries over a supply disruption in Kazakhstan and bullish comments from an OPEC+ official.

Gains are being capped, however, by a lockdown in Shanghai to curb rising coronavirus cases, which is expected to hit fuel demand in China, the world’s biggest importer.

At 11:12 GMT, May WTI crude oil futures are trading $107.32, up $1.36 or +1.28%. On Monday, the United States Oil Fund ETF (USO) settled at $74.57, down $6.17 or -7.64%.

Two sources told Reuters that Kazakhstan’s giant Tengiz and Kashagan fields cut oil output on March 27 after huge drops in intake to the Caspian Pipeline Consortium (CPC) pipeline due to maintenance on its terminal.

Reuters also reported that producer group OPEC+ was also expected to stick to its pledge for a modest rise in May at this week’s meeting, despite a surge in prices due to the Ukraine crisis and calls from the United States and other consumers for more supply.

United Arab Emirates energy minister Suhail al-Mazrouei said on Tuesday that the mission of OPEC+ was to stabilize markets and come up with as much supply as possible.

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 a closing price reversal top and secondary lower top on March 24.

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

The main range is $61.86 to $126.42. Its retracement zone at $94.14 to $86.52 is major support. It stopped the selling at $92.20 on March 15.

The intermediate range is $85.81 to $126.42. Its retracement zone at $106.12 to $101.32 is also support. It stopped the selling at $102.83 on March 28.

The short-term range is $126.42 to $92.20. Its retracement zone at $109.31 to $113.35 is the next upside target and potential resistance. It was tested successfully last week.

Daily Swing Chart Technical Forecast

The direction of the June WTI crude oil market on Tuesday is likely to be determined by trader reaction to $106.12.

Bullish Scenario

A sustained move over $106.12 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into $109.31 to $113.35.

Overcoming $113.35 will indicate the buying is getting stronger. This could lead to a test of the main top at $116.64. This is also the trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $106.12 will signal the presence of sellers. This could lead to a labored break with potential support levels a minor pivot at $104.42, a low at $102.83 and a Fibonacci level at $101.32.

The Fib level at $101.32 is a potential trigger point for an acceleration to the downside with $94.14 to $92.20 the next targets.