Crude Oil Price Update – Sellers Driven by Fed Rate Hike Concerns, Recession Fears

U.S. West Texas Intermediate crude oil futures are inching higher but inside Friday’s trading range. That and the limited price action suggests investor indecision and impending volatility.

Some of the uncertainty is being fueled by a shutdown of a key pipeline. Russian President Vladimir Putin’s threat to cut production in retaliation for a Western price cap on its exports is another concern. Nervousness ahead of the U.S. Federal Reserve’s interest rate and policy statement on Wednesday is still another worry.

At 08:18 GMT, January WTI crude oil futures are trading $71.20, up $0.18 or +0.25%. On Friday, the United States Oil Fund ETF (USO) settled at $62.86, up $0.15 or +0.24%.

Volume is light at the start of the week with many long traders trying to recover from a massive sell-off that drove prices down over 10% for the week and took them to their lowest level since December 2021. The catalysts behind the selling pressure were concerns that a possible global recession will impact oil demand.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $70.08 will signal a resumption of the downtrend. A move through $83.34 will change the main trend to up.

The minor trend is also down. A trade through $75.44 will change the minor trend to up and shift momentum to the upside.

The market is currently trading inside a major long-term retracement zone at $72.31 to $63.73. This zone represents value so aggressive counter-trend buyers could step in and try to form a support base.

Inside the retracement zone is the Jan. 3 main bottom at $69.05. This is potential support.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at $72.31 is likely to determine the direction of the January WTI crude oil market on Monday.

Bearish Scenario

A sustained move under $72.31 will indicate the presence of sellers. This could lead to a test of last week’s low at $70.08, followed by $69.05.

Taking out the main bottom at $69.05 will reaffirm the downtrend. This is a potential trigger point for an acceleration to the downside with the next targets a long-term Fibonacci level at $63.73, followed by the Dec. 20, 2021 main bottom at $63.25.

Bullish Scenario

A sustained move over $72.31 will signal the presence of buyers. This could trigger a rally into a minor pivot at $72.60, followed by the minor top at $75.44.

Side Notes

Taking out $70.08 then closing higher for the session will produce a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.