I suspect that we are going to see a lot of noisy behavior, maybe even sideways chop between now and the end of the year.
The West Texas Intermediate Crude Oil market pulled back a bit on Wednesday to reach down towards the 200-day EMA. However, we have seen enough buyers in that general vicinity to send this market higher, thereby opening up the possibility of a bit of recovery. I do not necessarily think that we are going to recover right away though, and I would anticipate that we would see a lot of noisy behavior between now and a total recovery. The $73 level above will more than likely end up being a bit of a barrier that is difficult to overcome, but if we did in fact rise above that level then I think we would probably see this market take off rather significantly.
On the other hand, if we were to break down below the 200-day EMA, then it is likely that we would see further selling. At that point, it is likely that we will go looking towards the $65 level, which is where we had bounced from significantly previously. Furthermore, that area also figures to be relatively important, due to the fact that there is a major trend line parked right at that level.
It should be noted that a lot of concerns out there about demand still remain, and I think it is probably only a matter of time before that gets addressed as well. It appears that the omicron variant of the virus is much less dangerous than initially thought, so it is possible that the demand destruction may be somewhat limited. OPEC recently has stated that they thought that omicron was going to be but a blip on the radar when it comes to demand, but it is also worth noting that the International Energy Agency has suggest that perhaps the supply chain has caught up with demand, and we are starting to enter “oversupply.” In other words, I suspect that we are going to see a lot of noisy behavior, maybe even sideways chop between now and the end of the year. The $69 level underneath is significant support, and as I had stated previously, the $73 level offers resistance. With that being the case, I think you probably have to look at this market through the prism of it hanging about in this area, and then following it once it breaks out.