The West Texas Intermediate Crude Oil market was very noisy during the month of March, so we need to be very cautious about jumping “all in”, as this market has a lot of crosswinds to deal with at the moment.
The most obvious problem will be the war in Ukraine, as it has taken a lot of Russian crude off the markets. The counterbalance is going to be the fact that we are getting closer to Iranian oil, as well as the possibility that Venezuela may be opened back up. If that is the case, it will open up quite a bit of supply in the market, and that could drive down prices. Another thing that could come into the picture is the idea of the biggest cure for higher prices will be higher prices. In other words, it creates a significant amount of demand destruction.
It appears that the $100 level will offer a certain amount of support, as it is not only an area where we have seen structural support, but it is also psychologically important. If we were to break down below there, then I think the market will go looking towards the $95 level. There is more structural support in that area, so I believe that breaking down below the $95 level would cause quite a bit of selling pressure. This would almost be certainly an effect on some type of fundamental news that drives down crude oil pricing.
On the upside, I think that the $120 level will more likely than not end up being a major resistance, so breaking above that could open up a move towards the highs again. A lot of this is going to come down to motion, but when you look at the weekly chart, you can clearly see that there has been an elevation of volatility, which is one thing that could work against the value of the market. We have a couple of clear levels that we need to pay close attention to, which could lead us to bigger gains or losses. I anticipate that the month of April is going to be a chaotic mess, just as we have seen during the month of March. However, the type of inertia that is being built up cannot last forever.