May WTI Oil Reaction to $101.32 Set Tone into Close

U.S. West Texas Intermediate crude oil futures are edging lower on Friday as traders await the outcome of a meeting of International Energy Agency (IEA) member nations set to discuss a release of emergency oil reserves alongside a huge planned release by the United States.

The U.S. benchmark is on course for a 12%-13% weekly decline – the sharpest in almost two years, after an earlier surge driven by the Ukraine conflict had seen prices rise by more than 30%.

At 13:05 GMT, May WTI crude oil futures are trading $99.63, down $0.65 or -0.65%. On Thursday, the United States Oil Fund ETF (USO) settled at $74.12, down $3.79 or -4.87%.

The market is still digesting the bearish news that drove prices lower the previous session. On Thursday, U.S. President Joe Biden announced a release of 1 million barrels per day (bpd) for six months, starting in May, the largest release ever from the U.S. Strategic Petroleum Reserve (SPR).

On paper the news is bearish, however, there are some doubters who believe the SPR release will have little long-term impact on prices.

“The looming flood of U.S. barrels does not change the fact that the market will struggle to find enough supply in the coming months,” PVM analyst Stephen Brennock said.

“The U.S. release pales in comparison to expectations that 3 million bpd of Russian oil will be shut in as sanctions bite and buyers spurn purchases.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $92.20 will change the main trend to down. A move through $116.64 will signal a resumption of the uptrend.

The minor trend is down. It turned down earlier today when sellers took out $98.44. This confirmed the shift in momentum. A trade through $108.75 will change the minor trend to up.

The market is currently trading on the weak side of its intermediate retracement zone at $101.32 to $106.12, making it resistance. The short-term resistance zone is $109.31 to $113.35.

The main range is $61.86 to $126.42. Its retracement zone at $94.14 to $86.52 is the next major downside target. This zone stopped the selling at $92.20 on March 15.

Daily Swing Chart Technical Forecast

The direction of the May WTI crude oil futures contract into the close on Friday is likely to be determined by trader reaction to $101.32.

Bearish Scenario

A sustained move under $101.32 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into $94.14, followed by $92.20. Taking out this level could trigger an acceleration into $86.52.

Bullish Scenario

A sustained move over $101.32 will signal the presence of buyers. If this move generates enough upside momentum then look for a labored rally with potential resistance levels at $106.12, $109.31 and $113.35. The latter is the last potential resistance before the $116.64 main top.