WTI oil volatility declines in anticipation of U.S. energy data

U.S. oil production companies are not really interested in hedging risks of declining oil prices this year. Instead, they are relying on oil prices to rise in the future.

However, in recent times, oil prices were falling because of worries about the banking crisis, forcing companies to cut costs and make payouts to shareholders.

According to Rystad, oil producers have closed about 27% of their oil production this year, compared with 40% in 2022. In addition, some companies do not use hedging instruments at all and have no plans to do so.

Thus, the head of Pioneer Scott Sheffield expects that the price of oil will reach $100 per barrel by the end of this year. In his opinion, the recent drop in oil prices is not due to weak oil demand.

The data on weak hedging level of downside risks for oil prices by U.S. oil producers may increase uncertainty in the market and increase volatility of WTI and Brent oil prices. For the fourth session in a row, we can see energy prices rise, oil producers' expectations are still being met, which may support WTI prices. Also, the risk of production cuts in the U.S. could lead to a supply cut in the market, which also provides an opportunity to support oil prices.

The energy sector has reduced its volatility waiting for EIA data on oil and oil products reserves. There is a probability of increase in commercial stocks in the U.S. storages.

The price of WTI crude oil has broken out of its H4 timeframe downtrend, indicating that a new trend is forming.

On the H1 timeframe, the price is forming the third wave of growth momentum. Breaking through the level of 71.65 indicates an increase in volatility towards the upside of WTI prices.

The signal:

WTI's short-term prospect is a buy. 

The target is at the level of 80.90.

Part of the profit should be taken at the level of 77.30.

A stop-loss is at the level of 70.75.

The bullish trend has a card character, so it is worth to select the trading volume of no more than 2% of your balance.