WTI crude oil formed higher highs and slightly higher lows, creating a broadening wedge pattern or megaphone on its daily time frame. Price is testing support at the bottom and might be due for a bounce back to the top.

Technical indicators are suggesting that support is more likely to hold than to break. The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside, so buyers might defend the floor around current levels.

If so, crude oil could recover to the wedge resistance around $90 per barrel or at least until the latest highs. Price could also find resistance at the area of interest at $80 per barrel. Take note, however, that crude oil has tumbled below both moving averages as an early indicator of selling pressure.

Still, RSI is just starting to pull higher from the oversold region to suggest that buyers are just warming up while exhausted sellers take a break. Similarly stochastic looks ready to move up from the oversold area to reflect a return in bullish pressure as well.

Crude oil has been dragged down by the pickup in risk aversion owing to the emergence of the Omicron variant late last week. This has prompted investors to be wary of more lockdowns and travel restrictions that could once again hurt business and consumer activity. In turn, this could lead to weaker demand for fuel and energy commodities.

Also, the US and China just recently released crude oil reserves into the global market, so the combination of weak demand and a boost to output could spur an oversupply. The OPEC has refrained from making any changes to their output deal for the time being.

The inventory figures lined up this week might determine whether or not the long-term support is likely to hold.