The price of U.S. West Texas Intermediate crude oil futures is increasing slightly on Thursday following a sharp drop the previous day. The market is being sustained by the extension of output cuts by OPEC+ and a decline in the value of the U.S. Dollar.
Some investors and traders at easymarkets may be taking advantage of the lower price after the benchmark fell more than 3% on Wednesday as a result of increased inventories of crude oil, gasoline, and distillate.
As of 08:55 GMT, March WTI crude oil is trading at $76.54, up 0.17%. The United States Oil Fund ETF (USO) ended at $67.36, down 2.83%. OPEC+ maintained its current output policy at a meeting, keeping the production cuts agreed upon last year in place due to the expectation of higher demand from China and the uncertain supply from Russia.
The U.S. Dollar weakened after the Federal Reserve Chairman, Jerome Powell, expressed his views on the disinflationary process and lack of concern about loose financial conditions, which often leads to higher foreign demand for the dollar-denominated commodity.
March WTI Crude Oil – Technical Perspective
The daily swing chart suggests that the main trend is upwards. However, momentum has been declining. Confirmation of the uptrend can be established with a breakthrough the $82.66 level. Conversely, a move through $72.74 would result in a change to the main trend being downwards. Currently, the minor trend is downwards, which is influencing the momentum.
A move through $79.73 would change the minor trend upward. The short-term range for the market is between $70.56 and $82.66, and it is currently testing its retracement zone of $76.61 to $75.18, which halted the selling on Wednesday at $76.05. The nearest resistance is a pivot at $77.70, followed by the major retracement zone of $80.23 to $82.51.
March WTI Crude Oil – Technical Forecast
On Thursday, the direction of the MAR’23 WTI crude oil market is likely to be determined by how traders respond to the short-term pivot at $76.61.
If the market sustains a move below $76.61, it will indicate that there are sellers in the market.
The initial target in this scenario would be the short-term Fibonacci level at $75.18. It is important to watch for a potential technical rebound on the first test of $75.18, but if this level fails, there may be a further decline with $72.74 being the next potential target.
A continued rise above $76.61 indicates the existence of buyers, with the initial target being $77.70, representing a 50% increase.
This could initiate a rapid increase to reach the minor top at $79.73 and then continue to the major resistance range between $80.23 and $82.51.
The Crude Oil Market Is Going to Be Very Noisy
The primary concern is whether central banks will suppress economic growth to control inflation. If they succeed in slowing down the economies worldwide, it will result in reduced demand for oil.
There are fears that the Urals may produce 50% more oil in the future, causing further problems. Despite this, the reopening of China does bode well for the possibility of rising oil prices, but only time will tell. In the meantime, the market is expected to be volatile as it fluctuates between the neckline of the inverted head and shoulders pattern and the key $80 level.
Above $80, there is the $81.50 level, which has previously offered strong resistance. A break above this could lead to a rise toward the 200-Day EMA near $87, which would attract a lot of attention and potentially result in a further increase in prices.
The Russia-Ukraine War and Crude Oil Market
The invasion of Ukraine by Russia caused a disturbance in the energy industry, including the oil market, but its impact on the volume of oil supplies has been minimal and less significant than initially estimated. Despite the decrease in Russian crude production by almost 1 million barrels per day (mb/d) during the conflict in February 2022, the output was able to recover rapidly due to the success of Russian sellers in finding new buyers outside of the G7.
The drop in crude and condensate production was limited, with Russian output in December 2022 being 230,000 b/d lower compared to its pre-war level of around 11 mb/d.
The EU’s embargo on Russian crude and products, which will take full effect in 2023, will keep Russian oil supplies in the spotlight. The effect of the embargo and the price cap on Russia’s production and exports will not be known until the end of the first quarter of 2023.
For 2023, the assumptions predict a range of supply losses for Russia between 700,000 b/d and 1.5 mb/d, with the reference case at 1.2 mb/d, but like in 2022, the supply disruptions could be smaller as exports continue to flow to Asia.
U.S. West Texas Intermediate crude oil futures prices are slightly increasing on Thursday following a drop the previous day. The market is being supported by the extension of output cuts by OPEC+ and a decline in the value of the U.S. Dollar.
The March WTI crude oil is currently trading at $76.54, up 0.17%. The primary trend for crude oil is upwards but momentum has been declining, with a key pivot at $76.61 determining the direction of the market.
The crude oil market is expected to be volatile in the near future with fears of central banks suppressing economic growth and reduced demand for oil. The Russia-Ukraine war has had a limited impact on the volume of oil supplies, with the EU’s embargo on Russian crude and products taking full effect in 2023. The effects of the embargo on Russia’s production and exports will be known at the end of Q1 2023.