WTI crude oil (NYMEX: CL) is on course for its first weekly gain in three, marking a 1.1% rise this week, with prices hovering around $83 per barrel. On the demand side, data from the US Energy Information Administration (EIA) revealed signs of slowing US fuel consumption. This aligns with recent reports indicating a cool-down in US business activity and stronger-than-expected inflation and employment figures. A delay in the anticipated US Federal Reserve interest rate cuts, fueled by these factors, could dampen economic sentiment and further weaken demand for crude oil.
Geopolitical tensions in the Middle East, however, offer a countervailing force. The ongoing conflict between Israel and Hamas in the Gaza Strip threatens to escalate, with the potential for a wider war that could disrupt oil supplies. Additionally, tensions between Iran and Israel, a major oil producer, remain unresolved, adding to the risk premium.
Technical Analysis
On the 4-hour chart, WTI crude oil is trading marginally higher at $83.08/BLL, having breached the key 50.00% Fibonacci retracement level. Currently, the price action is above the 20-SMA (green line) but remains below the 50-SMA (blue line) and the 100-SMA (orange line). The recent crossover of the 20-SMA and 50-SMA below the 100-SMA suggests potential bearish momentum.
If the price sustains below the 50.00% Fibonacci retracement level, the 61.80% Fibonacci retracement at $80.95/BLL could be a crucial level to watch. A decisive break below this level may trigger further downward movement towards the 78.60% Fibonacci retracement level at $79.12/BLL, followed by a major support level at $76.79/BLL.
Conversely, a sustained upward push could face resistance at the 38.20% Fibonacci retracement level of $81.63/BLL. A breakout above this resistance, on substantial volume, could confirm bullish momentum, targeting the 23.60% Fibonacci retracement level at $85.10/BLL, with the major resistance level at $87.67/BLL coming into focus.
Summary
WTI crude oil is maintaining its upward trajectory this week, supported by a decline in US crude inventories and easing geopolitical tensions. However, the market remains cautious due to potential demand concerns and awaits key economic data releases. The technical analysis also suggests a period of consolidation, with key support and resistance levels framing the short-term price action.
Sources: TradingView, Trading Economics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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