The WTI Crude Oil market rallied significantly during the trading session on Wednesday as we are now approaching the 200-Day EMA. The 200-Day EMA is sitting just above and now could offer a bit of resistance. The $95 level will be resistant, with the 50-Day EMA sitting just above there. There are a lot of questions when it comes to crude oil right now, so does make a certain amount of sense that we should see noise.
If the 50-Day EMA breaks down below the 200-Day EMA, then we have the “death cross.” This is a longer-term negative signal and could have some algorithms starting to sell. Furthermore, we have a lot of fundamental questions, not the least of which we whether not the Iranians are able to produce and sell crude oil into the markets. If that’s the case, and I do think that eventually ends up being the situation, that will flood the market with supply.
On the other hand, Saudi Arabia is now talking about cutting, so it’ll be interesting to see how this all plays out because they are complaining about the paper market not representing the physical market. At this point, the market is trying to break out and break higher from a rising wedge, but I think $100 is about as good as it gets to the upside.
Market Noise Ahead
- If we turn around and break down below the $90 level, then it is likely that the market could go much lower. At that point, we could see the market go down to the $80 level.
- The $80 level is an area where we should see quite a bit of interest, and a lot of longer-term analysts are starting to think that’s the target.
- Regardless, I think what we are going to see is a lot of noisy and choppy behavior, and therefore it’s likely that you need to think more or less of short-term trading more than anything else.
Keep an eye on the overall attitude of risk appetite as well, because if risk appetite is strong, then oil should do well. On the other hand, if risk appetite starts to pull apart, that could be negative for oil. A lot of this comes down to what central banks are doing as well, because if they raise rates drastically, that could drive down industrial demand.
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