U.S. West Texas Intermediate crude oil futures are trading higher on Monday after reversing earlier weakness.
The move is partly being fueled by short-covering tied to the release of strategic reserves by consuming nations, the lack of an Iranian nuclear deal and the shrugging off a ceasefire between Saudi Arabia and the Houthi group aligned with Iran for the first time in the seven-year conflict.
Also helping to fuel the rally is a report from Reuters that showed Russian output of oil and gas condensate fell to 11.01 million barrels per day (bpd) in March from 11.06 million bpd in February. The numbers were derived by Reuters calculations based on an Interfax report on Monday.
As European customers are taking cautious approach when dealing with Russian oil, analysts expect that Russia may have to cut production this month by between 1 million bpd and 1.5 million bpd, according to Reuters.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $92.20 will change the main trend to down. A move through $116.64 will signal a resumption of the uptrend.
The minor trend is down. Friday’s low at $97.78 is a new minor bottom. A trade through $108.75 will change the minor trend to up. This will shift momentum.
The main support is a retracement zone at $94.414 to $86.52.
The market is currently testing its intermediate retracement zone at $101.32 to $106.12.
The short-term range is $126.42 to $92.20. Its retracement zone at $109.31 to $113.35 is a key upside target. This zone is controlling the near-term direction of the market.
Daily Swing Chart Technical Forecast
The direction of the May WTI crude oil market into the close on Monday is likely to be determined by trader reaction to $101.32.
A sustained move over the Fibonacci level at $101.32 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into $106.12, followed by the resistance cluster at $108.75 to $109.31.
A sustained move under $101.32 will signal the presence of sellers. This could lead to a retest of the minor bottom at $97.78. Taking out this level will mean the selling momentum is getting stronger with the 50% level at $94.14 the next target, followed by the main bottom at $92.20.
Trend trading buyers are trying to form a potentially bullish secondary higher bottom. Counter-trend sellers are looking to change the main trend to down.