The West Texas Intermediate Crude Oil market has rallied again during the session on Wednesday as we await Federal Reserve guidance. At this point, the 200-Day EMA looks to be a bit of a target near the $92 level, but if we can break above there then we could see a complete turnaround in the overall trend, perhaps allowing crude oil to go much higher.
At this point, there are a lot of different geopolitical and economic factors coming into play when it comes to crude oil, and that’s part of why it’s been so choppy and difficult to trade as of late. The volatility intraday has been a bit difficult at times, as traders try to figure out whether the global slowdown is going to drive down demand enough to collapse this market, or if the OPEC cuts might help lift prices. Another question is going to be what’s going to happen to the Russian oil this winter, as sanctions are starting to come into play. However, the European Union has already shown its reluctance to fully “go nuclear” with those sanctions, and I anticipate that by the time it’s all said and done, not only will the European Union be providing weapons to the Ukrainians, but they will probably be funding the Russian army as well, via either direct oil sales or backdoor sales to China.
Choppiness Ahead
- If the Federal Reserve continues to crush demand, that will almost certainly have a major influence on crude oil as well, but it does look to me as if we are trying to turn things around, and it is probably worth noting that the US dollar will have its influence also.
- One other thing to watch would be whether the Chinese finally give up the “zero Covid” policy, which has been disastrous for demand in that country, which is now the largest importer of crude oil.
India is surging, so it’s possible that the Indians may make up for a bit of that slack, which consequently they are buying from Russia. At this point, I think the only thing you can count on is a lot of choppy behavior, so I reiterate the need to give your position size small. On the downside, the $82.50 level is supported, and the 200-Day EMA above is resistant. Breaking either one of those levels will give you the direction.
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