High fuel price
Next chapter for WTI prices besides fundament such as war in Ukraine, are talks about restriction for Russian oil. High prices of fuel across Europe and the rest of the world bring question about economic sustainability and possible recession. Prices of WTI soared to 131$ per barrel, after US announced possible ban to Russian energy products. Its government prepares the bill about embargo for oil from Russia. Despite this, final version has not been signed yet.
Cold water from Germany
US is not the only country taking time to consider oil embargo. Germany’s chancellor Olaf Scholz stopped discussion about restrictions. He called Russian oil and gas as “essential importance to the European economy”. Moreover, he added that finding the alternatives is not the task just for one night. This statement sent the prices of WTI down. For now.
Is sky really the limit?
Today market opened with enormous gap at 124.23$. Previous close was 115.90$. In consideration of fundaments mentioned above, WTI is currently erasing profits of -11.37% from the high.
30 minutes chart of CL (Crude oil futures), Source: tradingview.com
Based on futures volume it seems that the uptrend continuity should persist. WTI price action shows extensive 123 gap formation. And the lower level of 123 gap, 115.43$, works as support. Moreover, another volume indicator shows very similar support for CL (crude oil futures). Monthly and weekly VWAP (Volume weighted average price) indicate 116.09 and 116.57 as technical support.
30 minutes chart of CL, Monthly VWAP. Source: Author´s analysis
30 minutes chart of CL, Weekly VWAP. Source: Author´s analysis
High prices versus demand
High prices are welcomed in many financial assets, but not in energy sector. It has heavy impact on factories and retail consumers. Very high prices of oil and gas could trigger lower demand for commodities, and world can start to find alternatives for them. But we can not definitely tell where the break point is. Therefore, it is highly possible for another up move for WTI.