Risk-taking got traders buying “risky” bets like crude oil this week!
But how high can WTI crude oil prices (USOIL) fly with its fundamental and technical challenges?
In case you missed it, traders are (cautiously) dumping safe-havens in favor of “riskier” assets like commodities after the Fed decided to cut its interest rates by 25 basis points and shifted away from the “ongoing rate increases will be appropriate” game plan.
It also didn’t hurt that the International Energy Agency (IEA) raised its estimate for global oil consumption to record highs in 2023 in anticipation of a surge in Chinese demand.
WTI Crude Oil (USOIL): 1-hour
WTI crude oil prices, which started the week just under last week’s lows, jumped from the $65 mark and hit highs near $71.50 before coming back down to the $70 area.
This time, $70 also lines up with the 38.2% Fibonacci retracement of this week’s downswing as well as the broken 200 SMA resistance on the 1-hour time frame.
Are we seeing a small pullback before WTI resumes its upswing?
Bullish momentum above $70 opens WTI to a move to the $72.25 resistance that served as support from January until mid-March.
Before you buy crude oil like there’s no tomorrow, though, you should consider that downside risks to crude oil prices remain.
For one thing, U.S. Energy Secretary Jennifer Granholm told U.S. representatives in a congressional hearing that “it will be difficult for us to take advantage of this low price,” likely because they’re looking for even lower prices. As it is, Granholm shared that it will take “a few years” to refill the Strategic Petroleum Reserve.
Russia’s planned 500,000 barrels per day also isn’t doing much to push prices higher as the cut would come from a higher output base than initially indicated.
And then there’s the small matter of the global banking confidence crisis, which could continue to drag on “risky” bets like crude oil.
If WTI drops and then consistently trades below $70, then you can consider selling all the way to this week’s lows if not new monthly lows.
