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Oil gained as a tight market remains

The price of crude oil went sharply up thanks to fundamentals, which points to tight market before summer.

Tight market

Crude oil prices jumped out of the side move and went sharply up above 114$. Price has been raising during the whole Thursday, adding +3.50% in 3 hours. Markets evaluates higher price for black gold because of signals for tight market.

This signal could have been caused by lower than expected crude oil supply change in US. EIA macro were expected at -0.737 mil. of barrels, but the reported number is -1.019 mil. of barrels. Those numbers could signal tight market before US summer, time when demand for gasoline is higher. 

We analyzed also: USD/JPY looks bearish, targets 125

This week, OPEC+ made a statement about rising production only by previously agreed 432,000 bpd. Higher demand pressures were not on the table and OPEC+ sticks with the plan. This provides another supportive factor in tight market. 

Crude oil’s price move

The chart below shows this week’s price move. A side move is shown in the red rectangle, which has taken 4 days. Price skyrocketed above 114$ after fundamentals release. The immediate affect on price was +3.50%.

30 minutes chart of CL (Crude oil futures), Rising price of CL. Source: Author's analysis

30 minutes chart of CL (Crude oil futures), Rising price of CL. Source: Author’s analysis

Next chart shows the highest volume of the month (volume profile on the right) is at the same are as the abovementioned side move. Therefore it is good to point out, that this area could be a support area in the case of reverse move of crude oil. In addition, we can see oil is in the uptrend, which lasts more than 14 days. This uptrend is defined by higher highs and higher lows.

Uptrend in crude oil with the highest volume of the month. Source: Author's analysis

Uptrend in crude oil with the highest volume of the month. Source: Author’s analysis

Fundamentals rule

It is important to have in mind that technical analysis does not rule the price. Fundamentals such as China’s Covid situation, geopolitical situation caused by war in Eastern Europe and OPEC statements, have primary impact these days. Therefore it is highly important to know the problematic of this commodity and closely watch the development.  

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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