WTI crude oil is in correction mode from its climb, with price closing in on the 38.2% Fib at $81 per barrel. If this holds as support, the commodity could rally back to the swing high at $83.10 per barrel or higher.
The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support is more likely to hold than to break. A larger correction could find buyers at the 50% Fib that lines up with the 100 SMA or the 61.8% level closer to the channel bottom and $80 per barrel mark.
If price breaks below the channel bottom, it might still find buyers at the 200 SMA dynamic support, which might be the line in the sand for an uptrend.
Stochastic is already turning higher from the oversold region, suggesting that buyers are returning while sellers take a break. RSI has more room to slide before reflecting exhaustion among sellers, so the correction could keep going until oversold conditions are met.
The latest EIA inventory report revealed a draw of 4.6 million barrels, more than twice the estimated reduction of 2.1 million barrels. This confirms that demand remains strongly supported, even with concerns surrounding the Omicron variant.
Optimistic remarks from policymakers like Fed officials also helped buoy the commodity higher. Expectations that the global economy could weather the impact of the pandemic could keep demand for fuel and energy commodities supported in the near-term.
The upcoming Baker Hughes oil rig counts might bring volatility to crude oil prices early next week. Note that the OPEC has committed to maintaining its production target of increasing output by 400K barrels per day in an effort to keep prices stable. However, some nations are still struggling to increase output due to various factors, so supply remains limited.