WTI Crude Oil Price Analysis for Jan. 20, 2022

WTI crude oil is still trending higher on its hourly time frame, even after gapping lower earlier. Technical indicators are also suggesting that the uptrend could continue.

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. The 100 SMA also lines up with a rising trend line that’s been holding so far this year, adding to its strength as support.

Stochastic is indicating oversold conditions or exhaustion among sellers, so turning higher would mean that buyers are ready to take over and possibly close the gap. RSI is also pulling up without reaching the oversold area, suggesting that buyers are eager to return.

WTI crude oil gapped down on news of a pipeline attack in Turkey and Iraq but eventually settled higher, as analysts predicted this could lead to a massive reduction in supply.

Iran-backed Houthi rebels from Yemen claimed responsibility for the attack on the oil facility in Abu Dhabi, which is part of the world’s eighth largest oil producer. Further instability in the area could lead to more disruptions in output, preventing the cartel from reaching their target of boosting production by 400K barrels per day until next month.

The upcoming EIA report could still bring some volatility back to the market, as analysts are estimating a smaller draw of 2.1 million barrels compared to the earlier reduction of 4.6 million barrels. A surprise build or a lower reduction could mean more downside for the commodity, as this might highlight demand constraints due to Omicron worries.

On the other hand, another larger than expected draw could reassure investors that demand remains strongly supported despite the setbacks from the pandemic. This could also point to feeble supply, even prior to the attacks in the Middle East.

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