Crude Oil Price Update – Major Challenge for Bullish Traders at $76.09 – $74.78

U.S. West Texas Intermediate crude oil futures collapsed more than 4% on Tuesday. The catalysts behind the move were weak demand data from China, a gloomy economic outlook and a stronger U.S. Dollar. Earlier in the session, the benchmark was up by as much at $1.00 a barrel.

On Tuesday, March WTI crude oil futures settled at $77.12, down $3.33 or -4.14%. The United States Oil Fund ETF (USO) finished at $12.77, down $1.33 or -9.43%.

China’s factory activity shrank in December as surging infections disrupted production and weighed on demand after Beijing largely removed anti-virus curbs.

The Chinese government also raised export quotas for refined oil products in the first batch for 2023. Traders attributed the increase to expectations of poor domestic demand as the world’s largest crude importer continues to battle waves of infections.

Finally, the U.S. Dollar posted its largest one-day advance in more than 2 weeks. A stronger greenback can hurt demand for dollar-denominated commodities.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Tuesday when sellers took out the previous main bottom at $76.94. A move through the new main top at $81.62 will change the main trend to up.

The main range is $89.89 to $70.56. Its retracement zone at $80.23 to $82.51 stopped the rally at $81.62 on Tuesday. Last week, this zone stopped a rally at $81.21.

The short-term range is $70.56 to $81.62. Its retracement zone at $76.09 to $74.78 is the next downside target and potential support.

The major support zone is $70.21 to $62.12.

Daily Swing Chart Technical Forecast

Trader reaction to $77.12 is likely to determine the direction of the March WTI crude oil market early Wednesday.

Bearish Scenario

A sustained move under $77.12 will indicate the presence of sellers. This could trigger a quick break into the short-term 50% level at $76.09, followed by the short-term 61.8% level at $74.78.

Counter-trend buyers could come in on the first test of $76.09 – $74.78. But look for the start of an acceleration to the downside on a break under $74.78.

Bullish Scenario

A sustained move over $77.12 will signal the presence of buyers. The first target is a minor pivot at $79.21, followed by the main 50% level at $80.23, the main top at $81.62 and the main Fib level at $82.51.

Overtaking the main top at $83.14 could trigger an acceleration to the upside.