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Crude Oil – Technical Outlook

  

US Crude Oil Inventories

The Energy Information Administration’s (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation.

If the inventory level increases above the forecast, it means that demand has declined and therefore implies bearish oil prices. However, if the inventory levels are less than forecasted, demand is higher, and it means oil prices could increase.

Last week’s inventory levels was 18.962M barrels, worse than the forecast of -2.243M. The rising inventory levels indicate a lower demand.

The report is due Thursday, 19 January 2023 @ 16:00 GMT.

Technical Analysis Daily Timeframe

Moving Average (MA):

On the Daily timeframe, WTI price is currently trading below the 200MA with the price about to touch and cross the 50MA.

Relative Strength Index (RSI):

The RSI line is at 58, showing slight overbought condition.

Analysis using price action:

WTI on the higher time frame has been in downfall. Recently on 7th Oct 2023, the price broke the previous swing high; the momentum was fierce enough to continue the bullish wave, with the price going into a corrective phase and moving up again. However, the price could not break the high and instead formed a double-top pattern.

WTI price since then has seen a significant fall, going down by 25.12% and cutting off 2352pips. With a series of lower highs and lows, the price recently formed a bottom at $70.02 on 9th Dec 2022. After the bottom formation, the bulls started to gather, as we can see on the chart, some big green candles. The price was seen trading inside the bullish channel and stopping at $81.20, which is acting as a recent strong resistance zone.

However, the price is still trading above the bottom and trying to move up while trading near the $81.20 mark. The market is crossing above the 50MA. If the market breaks above the resistance zone, it may trade up; however, if the price fails to do so and instead break below the $72.50 zone, it may trade down.

Potential pivot points using Price Action:

Resistance PivotSupport Pivot
R179.70S178.58
R280.37S278.13
R380.82S377.46

This considerable resistance and support level can enter or exit when approaching future market openings.

Key Trading Recommendation

Oil prices increased last week due to lower US inflation numbers and reopening of the Chinese borders for the first time in 3 years which will boost demand. 

Traders should avoid entering positions during these news events since the market will have higher-than-average volatility, meaning that currencies could move in either direction without a definite trend for a short while.


Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.

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