Crude Oil Price Analysis:
- Oil prices remain supported by further supply constraints but key technical levels hold firm
- US Crude (WTI) aims to clear the $110 psychological handle but will bullish momentum prevail?
- Price action remains encapsulated between Fibonacci levels of historical moves
Oil Technical & Fundamentals Collide
Following the invasion of Ukraine in late Feb, oil prices have continued to soar, with both WTI and Brent finding support above the $100 p/b (per barrel) mark.
As condemnation against the Kremlin continues to rise, the embargo against Russian energy and gas from Western allies and European counterparts (including Germany, one of the primary importers of Russian energy) has exacerbated concerns that inflationary pressures may continue to mount.
US Crude Oil (WTI) Technical Analysis
Although fundamental factors are likely to remain as a prominent driver of price action, the monthly chart below highlights how key technical levels from historical and short-term moves have assisted in providing firm levels of support and resistance for price action, holding both bulls and bears at bay.
After rising above the 2014 high of $107.65 in early March, failure to gain traction above $120 enabled sellers to drive prices lower, before stabilizing around the $100 handle.
With both key psychological and Fibonacci levels currently in play, the monthly CCI (commodity channel index) remains in overbought territory, suggesting that although the uptrend remains intact (for now), bulls may be losing steam.
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US Crude Oil (WTI) Monthly Chart
Chart prepared by Tammy Da Costa using TradingView
While inflation currently remains at decade highs, supply constraints have been exacerbated by the ongoing conflict between Russia and Ukraine, providing an additional catalyst for price action.
US Crude Oil (WTI) Weekly Chart
Chart prepared by Tammy Da Costa using TradingView
As prices continue to whipsaw between the Fib levels of both the historical (2008 – 2020) and 2014 – 2016 move, the $94 - $108 range will likely continue to hold firm with a break towards either side increasing the probability of a breakout.
In order for upward trajectory to hold, bulls will need to conquer the $108 and $110 level, with the next level of resistance holding firm at $116,58 (the 14.4% Fib of the 2008 – 2020 move). If this level is broken, a break of the psychological $120 mark could leave the door open for a retest of the 2022 high at $130.5.
US Crude Oil (WTI) Daily Chart
Chart prepared by Tammy Da Costa using TradingView
However, for bearish momentum to gain traction, sellers would need to drive prices below $100 which could then bring $93.56 (the 38.2% retracement of the Nov 2020 – 2022 move) into play . If prices continue to fall below $90.00 and $88.39 (23.6% Fib of the 2014-2016 move) , it is possible for WTI to retest $80.00.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
