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Crude oil in the era of extremely high volatility

Over the past 5 days we saw more important statements for crude oil being published than over the period of last year. And consequences are apparent in the price development.

Statement after statement

There are 3 main fundaments affecting oil price these days. Moreover, thanks to these fundaments, we saw more important statements for crude oil being published than over the period of last year Of course, war in Ukraine is the main impulse. Additionally, this impulse has several consequences.

US ban

On Monday, Olaf Scholz, chancellor of Germany, called Russian oil and gas of “essential importance of the European economy”. In addition, possible embargo from EU side could be in danger. That sent price of black gold down to 115.62$. It was -11.53% from the highs. In less than 24 hours, US government announced ban on Russian energy product, such as oil and gas, which is opposite of what Germany did. This shows that US is not so dependable on Russian oil in comparison to Europe. Despite that, US sanction elevated price of CL (futures of WTI) by +12.04% to 129.49$ per barrel from the ‘Scholz’s’ low.

30 minutes chart of CL (Crude oil futures), Source: tradingview.com

OPEC+ is back

Let´s continue in 24 hours range of significant statements. On Wednesday, the UAE appealed to members of OPEC+ to lift supply of crude oil.

“The cartel, which counts Russia as a key member, has so far resisted calls from consumers to pump more, arguing that the surge in prices is driven by geopolitical tensions rather than a supply shortage.” 

That show more pressure on OPEC from several sides. Moreover, Russia is a member of this organization. This could shake the structure of cartel with many difficult talks ahead.

This fundament caused plunge in CL price to 103.63$ and total weekly high-low range widened to more than 20%, which is extraordinary.

30 minutes chart of CL (Crude oil futures), Source: tradingview.com

Fall of the price left interesting technical levels

Market profile of CL showed resistance levels consisted of POC (Point of control – biggest volume from last profile) and pivots. First resistance could be set in area 111.96$ – 112.86$. Next level area 117.6$ – 118.10$.

30 minutes chart of CL, Daily Market Profile. Source: Author´s analysis

On the other hand, weekly VWAP shows support, which has worked four times at 106.37$. Next support could be around 100 price tag.

30 minutes chart of CL, Weekly VWAP. Source: Author´s analysis

Mentioned support level is backed by monthly VWAP as well. To be specific at 150.29$ set by 1st standard deviation of averaged monthly volume (orange line). Next support level could be at 98.7$, which underlines 100$ price tag as interesting level.

Still in progress

We are in era of extreme high volatility these days, especially in the crude oil markets. War is not over and more fundament questions and difficult talks are rising. Iran nuclear deal is still unclear. Therefore, it is highly possible that volatility will continue next week. In the case of trading, it is more than appropriate to set right money management for new conditions on markets. Successful setup which worked before the war is not working at all today.  

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...

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