WTI Crude Oil prices (NYMEX: CL) edged higher on Tuesday, trading around $73 per barrel, supported by ongoing geopolitical tensions in the Middle East and Russia’s invasion of Ukraine. These factors raise concerns about potential disruptions to global oil supply, countering the bearish headwinds from strong US economic data and fading hopes for near-term interest rate cuts.
Recent US airstrikes in Iraq and Syria in response to Iranian attacks on American troops, coupled with the ongoing conflict in Ukraine, create an environment of uncertainty and potentially restrict oil supply. Traders remain vigilant amidst ongoing ceasefire negotiations in the Middle East, with developments impacting market sentiment.
Also, upbeat US Services PMI and Nonfarm Payrolls data suggest a robust US economy, potentially leading the Federal Reserve to maintain higher interest rates for longer. A stronger USD could exert downward pressure on oil prices due to its inverse relationship. Lastly, weaker-than-expected Chinese CPI and PPI data on Thursday could dampen oil demand, as China is the world’s second-largest oil consumer.
Technical
On the 4-hour chart, WTI crude oil is trading around $72.96/BBL, slightly below the 61.80% Fibonacci retracement level. The 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line) maintain a downward slope, indicating prevailing bearish sentiment. The Relative Strength Index (RSI) at 40.68 is slightly flat below 50.00, suggesting a neutral to bearish market.
Short-term trading opportunities towards the $74.58/BLL resistance could exist should the price action sustain a push above the 61.80% Fibonacci retracement level (golden ratio). A break above the $74.58/BLL level would likely bring the $76.93/BLL and $78.17/BLL resistance levels within the bulls’ reach in the short term.
However, the support level at $71.40/BLL would come into play should the golden ratio hold firm. A break below the initial support, at significant volume, could confirm the bearish momentum, likely bringing the $70.50/BLL and $69.28/BLL support levels into play.
Summary
WTI Crude Oil finds itself in a tug-of-war between bullish and bearish forces. Geopolitical tensions offer support, but the strong USD and China’s economic woes act as counterweights. Technical analysis suggests a potential upside move towards $74.58/BBL if the current momentum continues, but a breakdown below $71.40/BBL could signal further downside pressure.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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