Crude Oil Price Update – Strong Rally Fueled by Russian Supply Cut Fears

U.S. West Texas Intermediate crude oil futures are testing their highs of the session, strengthened by the prospect of lower Russian exports and the ongoing demand recovery. Despite the rally, some technicians questioned the move, citing lower trading volumes as the reason for the heightened volatility.

At 18:18 GMT, April WTI crude oil is trading $76.45, up $1.06 or 1.41%. The United States Oil Fund ETF (USO) is at $67.04, up $0.66 or +0.99%.

After a fierce comeback, the U.S. benchmark is now poised to log a second straight week of gains. The rally comes after the market plunged on Wednesday on rising interest rate fears after the Fed released the minutes from its last meeting on Feb. 1. Additionally, traders are also shrugging off another big jump in U.S. crude oil stockpiles.

The price action suggests traders are more worried about Russian supply cuts and increasing Chinese demand than rising U.S. inventories and a potential recession down the road.

Additionally, traders aren’t looking for the start of a prolonged downtrend because they believe OPEC+ will cut production to counter such a move.

Daily April WTI Crude Oil Technical Analysis

The main trend is down according to the daily swing chart. A trade through the nearest main bottom at $72.64 will reaffirm the downtrend. The main trend will change to up on a trade through $80.78.

The minor trend is also down. A new minor bottom has formed at $73.80. A trade through $79.76 will change the minor trend to up, shifting momentum to the upside.

The nearest resistance is a pair of 50% levels at $76.79 and $77.77. On the downside, the major support is the long-term 50% level at $69.79.

Daily April WTI Crude Oil Technical Forecast

Despite the strong two-day counter-trend rally, the market is still rangebound and traders are still in the “sell-the-rally” mode. We’re likely to see another round of selling if the market can get up to $76.79 – $77.77.

Things could get interesting if the buyers can drive prices over $77.77. This could spook short-sellers into covering aggressively with a resistance cluster at $79.76 the next key target.

Side Notes

The big takeaway is that the market was able to recover enough from the mid-week sell-off to almost turn higher for the week. This indicates that buyers are looking for value rather than chasing new highs.

As I said earlier, the market is rangebound which means buyers are looking for dips and sellers are watching for rallies.