Author: Sir Amar – Technical Analyst

Oil extended losses for a third session as investors weighed the prospect of further monetary tightening to combat rising US inflation and the possibility of more virus restrictions in China. Oil is still up nearly 60% this year as a rebound in economic demand coincided with a tighter market following Russia’s invasion of Ukraine. The war fueled inflation and raised the cost of everything from food to fuel. US gasoline retail prices have repeatedly broken records, recently reaching $5 a gallon.

West Texas Intermediate (WTI) fell more than 1% to trade near $119 a barrel amid a broad market sell-off. US inflation accelerated to a fresh 40-year high last month, raising the likelihood of more aggressive rate hikes by the Federal Reserve. Beijing and Shanghai are cracking down on rising virus cases as the world’s biggest crude oil importer faces a bumpy return from lockdowns. The United States has repeatedly asked OPEC to pump in more crude oil in a bid to control soaring gasoline prices and the highest inflation in decades.

Crude oil prices continue to break out of their recent 2+ month range and move above the Fibonacci extension level around $114.20 as measured from the November 2020 low, October 2021 high and December 2021. Upward momentum is firm, as crude oil prices are above their daily movement. The average envelope is up in sequential order. The daily trend continues above its signal line while the daily stochastic remains in the overbought territory. As long as Crude Oil prices remain elevated above $114.20, the price action towards the higher price level remains constructive.