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U.S. West Texas Intermediate crude oil futures closed higher last Thursday after recovering from an early session setback. Fueling the rally was a combination of short-covering and aggressive buying in reaction to reports that the European Union might phase in a ban on Russian oil imports.
On Thursday, June WTI crude oil futures settled at $106.38, up $2.59 or +2.50%.
The market turned higher late in the session after the New York Times reported that the European Union was moving toward adopting a phased-in ban of Russian oil, to give Germany and other countries time to arrange alternative suppliers.
A phased-in ban would force European buyers “to seek alternative sources, some of which in the near term is being met by Strategic Petroleum Reserve releases, but in the future, more supplies coming out of the ground will be required,” Andrew Lipow of Lipow Oil Associates in Houston said.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $107.00 will signal a resumption of the uptrend. A move through the next main top at $113.51 will reaffirm the uptrend. A trade through $92.60 will change the main trend to down.
The short-term range is $121.17 to $90.37. The market is currently testing its retracement zone at $105.77 to $109.40. This zone is controlling the near-term direction of the futures contract.
The main range is $61.48 to $121.17. Its retracement zone at $91.33 to $84.28 is support. This area is controlling the longer-term direction of the market.
Daily Swing Chart Technical Forecast
The direction of the June WTI crude oil market early Monday is likely to be determined by trader reaction to $105.77.
Bullish Scenario
A sustained move over $105.77 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the Fibonacci level at $109.40. Taking out this level could trigger a surge into the next main top at $113.51.
Bearish Scenario
A sustained move under $105.77 will signal the presence of counter-trend sellers. This could trigger a break into a minor pivot at $99.80.
Since the main trend is up, buyers could come in on a test of $99.80. If it fails, however, then look for the selling to possibly extend into the main bottom at $92.60.
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This article was originally posted on FX Empire