With the WTI Crude Oil Futures (NYMEX: CL) inching towards a third consecutive week of gains, currently boasting a 1.41% increase week-to-date, observers are drawn into a narrative of supply and demand dynamics.
The ascent of the oil futures at the beginning of the week was propelled by mounting concerns surrounding global supply dynamics. Heightened geopolitical tensions between Russia and Ukraine, compounded by enduring strife in the Middle East, underscored the pivotal role these regions play in shaping the supply of crude oil worldwide.
Yet, a setback ensued as the American Petroleum Institute (API) unveiled inventory data indicating a substantial build-up of 9.337 million barrels, sparking fears of potential oversupply or weakening demand, factors which weigh on prices. Markets reacted swiftly, shedding positions over two days in response to this data.
However, amidst this turbulence, a glimmer of optimism emerged with the latest Energy Information Administration (EIA) report, revealing a more modest weekly increase in US crude inventories at 3.165 million barrels, contrasting the API’s figures. As traders brace for the week ahead, all eyes are fixed on the forthcoming PCE Price Index report, the Federal Reserve’s preferred inflation gauge, poised to sway market sentiment with its revelations.
Technical
The current trajectory of WTI Crude Oil Futures indicates a prevailing uptrend, underscored by its position above the 100-day moving average. However, recent market dynamics reveal a nuanced picture of fluctuating momentum.
Following a period of overbought conditions in the Relative Strength Index (RSI), trading volumes diminished, leading to a waning of upside momentum and a resurgence in downside pressure. This shift has facilitated the formation of a symmetrical triangle pattern characterized by converging highs and lows, suggesting an impending consolidation phase.
Notably, resistance materialized at the upper boundary of the symmetrical triangle, marked at the $82.36 per barrel (BLL) level, while support has held firm at the lower boundary, or the $80.55 BLL level. Bullish sentiment has propelled the oil futures beyond the 61.80% Fibonacci Retracement Golden Ratio, signalling the potential for further upside movement towards a retest of the $82.36 level. However, amidst this optimism, caution is warranted. Should downward pressures resurface, attention may turn to the 50% Fibonacci level as a potential area of interest for short-term trading opportunities.
Summary
Despite recent volatility, the WTI Crude Oil Futures exhibit resilience amid geopolitical tensions and inventory fluctuations. With a bullish trajectory supported by technical indicators above the 100-day moving average, attention turns to key resistance at $82.36 per barrel. However, caution prevails amidst potential downside pressures.
Sources: American Petroleum Institute, Energy Information Administration, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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