WTI crude oil very quickly reached its growth target of 77.7, which was set at the beginning of this week. Thus, in order to recover from last week's failure completely, the WTI oil price should go a little bit higher - to the round level of 80. Considering that there is already less than 2% to this level, the target can be reached before the end of Friday's trading session.
The statistics on reserves from the U.S. Energy Information Administration (EIA), which were far from ideal again, did not prevent the upward movement of oil. Although there is still a slight improvement: yes, reserves of crude oil rose again last week (by another 2.4 million barrels), but the result was still better than analysts' expectations (an increase of 2.457 million barrels was forecasted).
Oil "bulls" were not confused by the growth of production in the U.S. by 100 thousand barrels per day to 12.3 million barrels per day, which is the highest since April 2020. Taking into account the very cautious growth of investment in production expansion, it can be expected that the U.S. oil companies will not be able to destabilize prices by a sharp increase in supply, as it was in the middle of the last decade.
The oil market still expects an increase in demand from China. Also, the consumption of petroleum products in India, which, despite some decline in January compared to December, still shows a significant increase relative to the beginning of 2022, can provide support. Expectations for demand growth in Asia now exceed almost all other factors affecting the oil market.
On the chart of WTI oil the Stochastic indicator is gradually getting closer to the overbought zone, but there is still some space for growth. Probably, just near the round level of 80, the "bulls" who opened their positions at the beginning of the week, will take profits, which will lead to a further correction.
The following trading strategy option can be suggested:
Buy WTI oil in the range of 78-78.5. Take profit – 80. Stop loss – 77,5.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.