WTI Oil Price Outlook: Sharp Moves, Nasty Headlines, Levels To Know

OIL RIPS THEN DIPS ON SAUDI ATTACKS

WTI crude oil prices closed last week below the 55-level, continuing to show tendencies of the range formation that had built over the prior month. The open this week saw WTI quickly push above $62 and eventually $63 as another flare in Middle East tensions threatened massive production disruptions. A drone attack that may have impacted as much as 58% of Saudi production took place over the weekend, with the wide suspicion that the drone came from Iran. So not only was current production disrupted but there was the prospect for more as this provocation could set the stage for even more tensions between the two countries and, perhaps even, an entrance into the situation by the United States.

A day later, Saudi Arabia said that production would normalize by the end of the month, with more than 50% of that lost production already being restored as of Tuesday. And given the upcoming Aramco IPO, it makes sense as to why the nation would look to keep production running high in order to keep revenues running before selling equity. This helped to bring about a 61.8% retracement of that breakout move, with support showing above a key area on the chart around the 57.50 psychological level.

WTI CRUDE OIL FOUR-HOUR PRICE CHART

wti crude oil four hour price chart

Chart prepared by James StanleyCrude Oil on Tradingview

OIL STRATEGY MOVING FORWARD

At this point the headlines are a key driver, and that can be problematic given the sheer unpredictability of that element. Surely, traders, like most people, have their own biases to how these situations will play out but, to the speculator, relying upon those opinions isn’t often a workable luxury. What the vulnerability to headlines and future developments on this theme mean is that trends can be even shorter-lived and directional prognostications are likely to be even more challenging than normal, which can mean a lower win/loss ratio for traders looking to take a stance. This can be offset, however, by looking for larger risk-reward ratios on swing trading strategies, looking to sell resistance and fade rips while looking to buy sell-offs at support with relatively tight stops so that if the level doesn’t hold, loss mitigation can be prioritized. So that lower win/loss ratio can potentially be offset by larger wins and smaller losses.

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