WTI Oil Tests Resistance At $88.40

Key Insights

• WTI oil is trading near the key resistance level at the 50 EMA. 
• Traders take some profits off the table after the recent rally, but there is no sell-off as market participants are focused on production cuts. 
• A successful test of the 50 EMA will push WTI oil towards the next resistance level at $90.30.

Traders Wait For Clarity On Russian Oil Price Cap Plan

WTI oil faced resistance at the 50 EMA at $88.40 and pulled back as traders took profits after the recent rally.

Yesterday, OPEC+ decided to cut production by 2 million bpd, which was bullish for oil markets. Traders should note that OPEC+ is not able to meet its own quotas due to production problems in several member countries, so the size of actual cuts will be much less than 2 million bpd.

However, the decision sends a strong signal to oil markets – OPEC+ is determined to push oil prices back into the $90 – $100 range.

Traders should also keep in mind that EU plans to introduce a price cap on Russian oil in its next sanctions package. Russia has previously stated that it would not supply oil to countries that participate in the price cap scheme. According to Bloomberg, Russia may be ready to cut production by as much as 3 million bpd. Such production cuts will have a huge impact on oil markets.

The risks associated with the price cap plan will likely provide additional support to oil markets in the near term. In this light, it remains to be seen whether oil will manage to gain downside momentum due to profit-taking.

WTI Oil Is Stuck Below The Key Resistance At The 50 EMA

Currently, WTI oil is trading near the $88 level. The nearest resistance level for WTI oil is located at the 50 EMA at $88.40. A move above the 50 EMA will signal that WTI oil will try to gain additional upside momentum. A successful test of the 50 EMA will push WTI oil towards the resistance at $90.30. In case WTI oil settles abov $90.30, it will head towards the $92 level.

On the support side, the nearest support level for WTI oil is located at $86.20. In case WTI oil declines below this level, it will head towards the support at $83.50. A move below this support level will push WTI oil towards the next support at $81.20.

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