Upon analyzing the movements of the WTI crude oil in different time charts, I anticipate that besides surging geopolitical concerns and a weakening US Dollar, supply concerns could trigger a buying spree after some consolidation at the current levels.
Undoubtedly, technical formations indicating a steep slide await here while the fundamentals like to remain at the front as the investors are still busy mapping the impact of Trump’s trade tariff policies.
On Monday, Iran was poised to reject a US proposal to end a decade-old nuclear dispute as the Iranian diplomat could not succeed in softening Washington’s stance on uranium enrichment.
I anticipate that if nuclear talks between the U.S. and Iran fail, there could be continued sanctions on Iran, which would limit Iranian supply and be supportive of oil prices this year.
Secondly, if the tariff trade policies continue to dent the U.S. economy, it could weaken the U.S. dollar in comparison to other currencies, which would bearish pressure on oil prices for a longer duration if the Fed does not come up with more rate cuts.
On the other hand, a wildfire in the province of Alberta in Canada has prompted a temporary shutdown of some oil and gas production, which could reduce supply in the short term, as the wildfire in Canada has affected more than 344,000 bpd of oil sand production.
I anticipate that all these supportive factors could provide some strength to the oil bulls, but the upside seems to be capped in WTI crude oil futures as U.S. President Donald Trump could soften some hardliner policies, formed after the declaration of the national energy emergency.
Secondly, Trump’s policies are mainly centred around keeping the U.S. dollar strong, as seen during last week’s stance of stepping back on higher tariffs on European nations, which provided good strength to the U.S. dollar.
Technical Levels to Watch
In the daily chart, WTI crude oil futures are trying to defend the immediate support at the 50 DMA at $62.70 but are still below the immediate resistance at $63.36, which has formed a bearish doji. This could extend bearish pressure on WTI crude oil futures in today’s session.
A breakdown below the 50 DMA could push the WTI crude oil futures to test the next support at yesterday’s lows.
On the other hand, any breakout above the immediate resistance at $63.36 could push the futures to test the next resistance at $64.93.
In the weekly chart, WTI crude oil futures are holding above the 9 DMA at $61.73 and could attempt an upward move to test the next resistance at the 20 DMA at $65.85 despite the formation of a bearish crossover as the 9 DMA has come below the 20 DMA.
Disclaimer: Readers are requested to take any position at their own risk as this analysis is based only on observations.