Crude Oil Price Update – Cooler-than-Expected US Consumer Inflation News Fuels Turnaround

U.S. West Texas Intermediate crude oil futures finished higher on Thursday after reversing earlier weakness. The turnaround was triggered after the market found support in a key value area on the daily chart and following the release of a cooler-than-expected U.S. inflation report.

The technical reversal combined with the tepid inflation data helped offset worries that renewed COVID-19 curbs in China would hurt fuel demand.

On Thursday, December WTI crude oil settled at $86.47, up $0.64 or +0.75%. The United States Oil Fund ETF (USO) closed at $72.21, up $0.54 or +0.75%.

Tamer-than-Expected US Inflation Data Dampens Fear of Recession

Crude futures rallied after U.S. consumer inflation data supported investor hopes that the Federal Reserve would temper its interest rate hikes. This could weaken the chances of a recession, which would support oil demand.

The U.S. inflation news also drove down the U.S. Dollar, which helped fuel foreign demand for dollar-denominated crude oil.

Supply is Tight, but Rally Will Be Capped by China COVID Cases

The current supply situation is tight because of OPEC+ production cuts and the upcoming European Union embargo of Russian Oil. This is enough to underpin prices but not enough to support a rally if demand from China is weak.

What the market needs is a bullish catalyst. That would likely be the easing of China’s COVID restrictions. That’s the potentially bullish wildcard.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Thursday when sellers took out the last swing bottom at $85.30.

A trade through $84.70 will signal a resumption of the downtrend. A move through $93.74 will change the main trend to up.

On the downside, the key support zone is a pair of 50% levels at $85.49 to $84.72. This zone stopped the selling on Thursday at $84.70.

Additional support is a short-term Fibonacci level at $82.59.

The minor range is $93.74 to $84.70. Its 50% level at $89.22 is the nearest resistance.

The major resistance is the long-term retracement zone at $93.24 to $97.38. It stopped the rally at $93.74 on November 7.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% levels at $85.49 and $84.72 is likely to determine the direction of the December WTI crude oil futures contract early Friday.

Bullish Scenario

A sustained move over $85.49 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the pivot at $89.22. Sellers could come in on the first test of this level, but overcoming it could extend the rally.

Bearish Scenario

A sustained move under $84.72 will signal the presence of sellers. This could trigger a sharp break into $82.59. If this fails then look for the selling to extend into $79.52.