Markets are preparing for the long-term consequences of the Russian invasion

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U.S. West Texas Intermediate crude oil futures are up on Friday after failing to confirm Thursday’s potentially bearish daily closing price reversal top. The weekly uptrend is gaining strength while the daily uptrend is showing signs of running out of steam.

Volatility is fueled by fears of a disruption in Russian oil exports in the face of Western sanctions, which would support higher prices, and the prospect of increased supplies from Iran in the event of a nuclear deal with Tehran, which could provide short-term relief to rising prices.

The Russian attack on Ukraine will remain in focus for months, which means supply concerns will remain at the forefront. It also means that prices are likely to remain at high levels, which will put pressure on the government to restart the Iran nuclear deal.

Short term recap

U.S. West Texas Intermediate crude oil futures traded at an 11-year high on Thursday, extending the rise since Russia invaded Ukraine seven days ago. The catalysts for the recovery are expectations that the market will remain undersupplied for months to come after tough sanctions are imposed on Moscow. Additionally, a flood of divestments from Russian oil assets by big business has left users scrambling to find fuel alternatives.

While the energy sector was not specifically targeted, the sanctions hampered the export capabilities of Russia, whose oil exports account for around 8% of global exports…

U.S. West Texas Intermediate crude oil futures are up on Friday after failing to confirm Thursday’s potentially bearish daily closing price reversal top. The weekly uptrend is gaining strength while the daily uptrend is showing signs of running out of steam.

Volatility is fueled by fears of a disruption in Russian oil exports in the face of Western sanctions, which would support higher prices, and the prospect of increased supplies from Iran in the event of a nuclear deal with Tehran, which could provide short-term relief to rising prices.

The Russian attack on Ukraine will remain in focus for months, which means supply concerns will remain at the forefront. It also means that prices are likely to remain at high levels, which will put pressure on the government to restart the Iran nuclear deal.

Short term recap

U.S. West Texas Intermediate crude oil futures traded at an 11-year high on Thursday, extending the rise since Russia invaded Ukraine seven days ago. The catalysts for the recovery are expectations that the market will remain undersupplied for months to come after tough sanctions are imposed on Moscow. Additionally, a flood of divestments from Russian oil assets by big business has left users scrambling to find fuel alternatives.

Although the energy sector has not been specifically targeted, the sanctions have hampered the export capabilities of Russia, whose oil exports account for around 8% of global supply, or 4-5 million barrels per day, more than any country other than Saudi Arabia, Reuters mentioned.

Adding fuel to the fire, the White House on Wednesday said it was “very open” to the possibility of targeting Russian oil and gas with sanctions. This could drive prices up even more, but some traders believe the market has already priced in this possibility.

Weekly technical analysis

April WTI Weekly Crude Oil

Analysis of trend indicators

The main trend is up according to the weekly swing chart. The trade at $100.54 reaffirmed the uptrend. A move to the weekly high at $116.57 will signal that buying is strengthening.

The minor trend is also up. A trade at $81.06 will change the minor downtrend. It will also change the dynamic.

Retracement level analysis

The market is currently testing a longer-term retracement zone between $111.45 and $136.92.

The first minor range is $81.06 to $116.57. Its 50% level at $98.82 is the closest support. This level will increase as the market increases.

The short-term range is $61.84 to $116.57. Its retracement zone at $89.21 to $82.75 is the best area of ​​support.

Weekly Technical Forecast

The direction of the April WTI Crude Oil market the week ending March 11 will be determined by the reaction of traders at $111.45.

Bullish scenario

A sustained move above $111.45 will indicate the presence of buyers. If this move creates enough bullish momentum, look for a break above the weekly high at $116.57. This is a potential trigger point for acceleration towards the next upside target at $136.92.

Downside scenario

A sustained move below $111.45 will signal the presence of sellers. This could trigger a short-term pullback in the first pivot at $98.82.

Short-term outlook

We expect volatility to continue into next week as traders wait to see if an escalation in the war will lead to further sanctions against Russia’s oil industry. This would likely drive WTI prices well past $111.45 and closer to technical resistance at $136.92.

In the meantime, the Biden administration hopes the war will end quickly. In addition to sanctions, he countered rising oil and gasoline prices with further releases from the Strategic Petroleum Reserve. However, the 60 million barrels it has pledged to make available are simply not enough to drive down prices at the pump.

This week, OPEC+ agreed to continue increasing daily production by 400,000 barrels. But the nuclear deal between the United States and Iran will continue to be the wild card. While it may take months for Iranian oil to have a major impact on supply, some traders believe the news will be enough to cap gains, at least temporarily.

April WTI Crude Oil is trading in a long-term retracement zone. Normally we look for countertrend selling pressure, but with such strong bullish momentum right now, I don’t think the sellers will sell short, but they might take some profit by easing the long side.

Moreover, currently the market is only $3.00 above the 50% level at $111.45. This means that the top of the zone is over $20, giving bullish traders plenty of incentive to continue the rally.

There is another scenario that could weaken prices. It’s high prices. There’s an old saying at the Chicago Mercantile Exchange in Chicago that goes, “The only thing that cures high prices is high prices.” This means that when prices get too high, users stop buying. It scares weak desires to take profits. This in turn is fueling a selloff that is not designed to reverse the downward trend, but to weaken prices enough to attract new buyers.

The reaction of traders at $111.45 will set the tone in the short term. Holding above this price will mean that buyers are still present, but a close below this level will create a potentially bearish condition. This will not change the trend, but it will indicate that selling is greater than buying at current price levels. Nonetheless, a short-term break will only be treated as a buying opportunity for bullish speculative traders.

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