WTI crude oil is in correction mode, as price is pulling back to the area of interest marked by the Fibonacci retracement tool. Price is already testing the 38.2% Fib level around $70.50 per barrel.

This lines up with the 100 SMA dynamic support, which is above the 200 SMA to indicate that the path of least resistance is to the upside. In other words, support is more likely to hold than to break.

A larger correction could still reach the 50% level around $69.60 per barrel near the 200 SMA or the 61.8% Fib that lines up with a former resistance zone at $68.69 per barrel. If any of these levels are able to keep losses in check, crude oil could recover to the swing high at $73.42 per barrel or higher.

RSI is already pulling higher from the oversold region to signal a return in bullish pressure. Stochastic is also just starting to turn higher, and both oscillators have plenty of room to climb before reflecting exhaustion among buyers.

The latest EIA inventory report showed a smaller than expected draw in stockpiles at 0.2 million barrels versus the estimated reduction of 1.5 million barrels. This suggests that supply may have been elevated or that demand remained weak in the reporting week.

Note that this might be a one-off downside surprise since the US just released oil reserves into the global market right before the detection of the Omicron variant. These may have combined to result into a smaller than expected draw in inventories.

Risk aversion might still continue to keep gains in check, though, as more nations and investors remain wary of another set of lockdown measures. A return in risk-taking, possibly spurred by more vaccine data suggesting resistance to the Omicron variant, could allow higher-yielding assets like commodities to rally again.