Crude Oil Price Update – Rate Hike Worries Shaking Out Longs

U.S. West Texas Intermediate crude oil futures are trading flat on Friday shortly after the release of a strong U.S. Non-Farm Payrolls report that suggests the U.S. is not in a recession and that the Fed is likely to continue on its aggressive rate hiking path.

Prices have come under pressure this week as the traders have fretted over the impact of inflation on economic growth and demand, but tight supply has kept a floor under prices.

At 12:45 GMT, September WTI crude oil futures are trading $88.56, up $0.02 or +0.02%. On Thursday, the United States Oil Fund ETF (USO) settled at $71.53, down $2.00 or -2.72%.

The price action throughout the week has been indicating that traders are taking the threat of recession far more seriously – meaning demand will take a hit, but today’s U.S. jobs report suggests the economy may not be headed that way. Furthermore, it could mean investors will shift their attention back to a market that is facing tight supply and producers with no capacity to change that.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Thursday’s low at $87.55 will signal a resumption of the downtrend. A move through $101.88 will change the main trend to up. This is unlikely but since the market is testing a major support zone, it may be ripe for a closing price reversal bottom.

The market is currently testing a major 50% to 61.8% retracement zone at $89.54 to $82.80. This zone stopped the selling in mid-July at $88.23.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at $89.54 is likely to determine the direction of the September WTI crude oil market into the close on Friday.

Bearish Scenario

A sustained move under $89.54 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for the selling to possibly extend into the major Fibonacci level at $82.80.

Bullish Scenario

A sustained move over $89.54 will signal the presence of buyers. If this generates enough upside momentum then look for a possible surge into a minor pivot at $94.72.

Side Notes

A close over $88.54 will form a minor closing price reversal bottom. If confirmed, this could trigger the start of a short-term counter-trend rally.