Crude Oil Price Update – Reluctance to Step in Front of Fed’s Powell Generating Tight Trading Range

U.S. West Texas Intermediate crude oil futures are edging higher on Friday on signs of improving fuel demand after slumping the previous session in volatile trading as investors braced for the possible return to global markets of sanctioned Iranian oil exports and on worries that rising U.S. interest rates would weaken fuel demand.

At 05:00 GMT, October WTI crude oil futures are trading $93.31, up $0.79 or +0.85%. On Thursday, the United States Oil Fund ETF (USO) settled at $76.50, down $1.54 or -1.97%.

On a positive note, despite uncertainty over the pace of rate hikes in the United States to tackle soaring inflation, worries about oil demand destruction eased this week, putting the benchmark oil contracts on track for gains of around 3% on the week, according to Reuters.

Negatively speaking, however, traders are worried about an Iran Nuclear Deal that will bring more oil to the market and could drive prices sharply lower over the near-term. Traders seem reluctant to explore the long side of the market aggressively until this matter is settled. No one wants to get caught on the wrong side of the market if and when the headline announcing the deal is released.

Traders are also reluctant to step in front of a highly anticipated speech from Fed Chair Jerome Powell on Friday at 14:00 GMT. Powell is expected to summarize where the Fed stands in its fight to control inflation, including information about its rate-path hike in the long and short-term. An extremely hawkish Powell could sink the market.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside following Thursday’s closing price reversal top.

A trade through $92.29 will confirm the chart pattern and could trigger a 2 to 3 day correction. A move through $95.76 will negate the chart pattern and signal a resumption of the uptrend.

The short-term range is $99.75 to $85.37. The market is currently testing its retracement zone at $92.56 to $94.26.

The minor range is $85.37 to $95.76. Its pivot at $90.57 is potential support, followed by major support at $88.26.

On the upside, the major resistance is $100.41 to $103.95.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at $92.56 is likely to determine the direction of the October WTI crude oil market on Friday.

Bullish Scenario

A sustained move over $92.56 will indicate the presence of buyers. Taking out the short-term Fibonacci level at $94.26 will indicate the buying is getting stronger. This could trigger a surge into $95.76.

A trade through $95.76 will not only negate the closing price reversal top and signal a resumption of the uptrend, but it could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under $92.56 will signal the presence of sellers. This could trigger an acceleration into the pivot at $92.57. If this fails then look for the selling to extend into the major support at $88.26.