Fifth month in a row
Oil gains for another month in a row, when WTI futures price is up to 108$ per barrel. Overall it is a fifth month in continuous rise of the black gold. The last similar gain in oil was in January 2018. All in all, crude oil has gained over 6 % in April. But it needs to be said that volatility is enormous at around 17,5%.
4 hours chart of CL (Crude oil futures), April’s volatility. Source: tradingview.com
The volatility issue
There are two main factors, which have significant impact on crude oil trend. First of all it is war between Russia and Ukraine, which has been ongoing for over 3 months, with no end at sight. Big question was Germany’s approach to Russian oil embargo, with regards to different gas politics among European countries. Germany has two different approaches. While Germany is willing to pay for Russian gas, oil is a different story, as Bloomberg stated:
“Germany has signalled that it wouldn’t oppose a European Union embargo on Russian oil, but expressed scepticism that it’s the most effective means of damaging President Vladimir Putin.”
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Second factor is China’s resurgence of Covid-19, with strict lockdown politics in some provinces. Lockdown is a significant obstacle for an appreciation of black gold price, because of slowing the economy by the demand being hit. Big question for investors is, how will China operate with Covid surge in the country and how much damage the lockdown restrictions could do.
Those two main factors have been moving with oil from low 92,79$ to high at 109,24$, which represents mentioned volatility 17,50%. Nevertheless, if we look at the stock market, the volatility of crude oil does not seem that bad.
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Technical analysis
Monthly volume weighted average price (VWAP) shows strong resistance close to months high at 107,89$. As we can see, this level worked as a resistance and it was tested again yesterday. In the case of continuous trend to north, another resistance could be level 114,99$. On the other hand possible support levels are at psychological level 100$ and next support is at 97,30$.
30 minutes chart of CL, Monthly VWAP. Source: Author’s analysis
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