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Analysis

Oil Technical Analysis | Hedge funds are buying oil

BY Janne Muta

|January 18, 2024

Oil Technical Analysis - As the market stabilises, hedge funds have been cautiously purchasing oil ahead of reports that the International Energy Agency (IEA) and OPEC projecting a robust increase in global oil demand this year. The IEA raised its demand growth forecast by 180,000 barrels per day (bpd) to 1.24 million bpd for 2024, citing economic expansion and lower prices in the fourth quarter.

Meanwhile, OPEC's demand growth projection remains at 2.25 million bpd. Despite the volatility in supply and demand and ongoing tensions in the Middle East, the IEA anticipates a well-balanced oil market in 2024.

Hedge funds are cautiously investing in oil amidst escalating geopolitical tensions, including Houthi assaults in the Red Sea and Pakistan's military actions in Iran, which are exerting pressure on oil prices. In the United States, North Dakota reported a significant reduction in oil production owing to severe cold weather. Anticipation is building for the upcoming U.S. government report on oil inventories, especially after a noted rise in crude stockpiles.

Summary of This Oil Technical Analysis Report:

  • Oil has created a higher reactionary low at 67.94 and has since then continued to consolidate, creating a bullish triangle formation. The top of the triangle formation is at 76.18. If the triangle is resolved to the upside, we could see the market trading higher to the 72.33 - 80.62 range. A bearish breakout from could move the market down to 66.93.
  • Oil rallied over 3% from yesterday's low. The market attracted buyers at a rising trend line support and created a bullish rejection candle yesterday. Above 70.60, look for a move to 75.28. Alternatively, below yesterday's low, the market could move down to 69.40.
  • The 8-hour chart shows the nearest resistance level at 73.65. If this can be penetrated decisively, the market could trade up to the 75.28 - 76.18 range. Alternatively, if the minor support level at 72.12 breaks, the market might trade down to yesterday's low at 70.60.

Read the full oil technical analysis report below.

Oil Technical Analysis

Oil Technical Analysis, Weekly Chart

Weekly Oil Technical Analysis

Oil has created a higher reactionary low at 67.94 and has since then continued to consolidate, creating a bullish triangle formation. The top of the triangle formation is at 76.18.

If the triangle is resolved to the upside, we could see the market trading higher to the 72.33 - 80.62 range. A bearish breakout from could move the market down to 66.93. The stochastic oscillator is moving higher, indicating bullishness in the market, while the moving averages are moving sideways due to the long-term sideways range in oil.

Oil Technical Analysis, Daily Chart

Daily Oil Technical Analysis

Oil rallied over 3% from yesterday's low. The market attracted buyers at a rising trend line support and created a bullish rejection candle yesterday. The moving averages continue contracting, with the SMA(20) approaching the slower SMA(50). Oil technical analysis, therefore, indicates higher prices for the coming days. Above 70.60, look for a move to 75.28. Alternatively, below yesterday's low, the market could move down to 69.40.

Oil Technical Analysis, intraday Chart

Intraday Oil Technical Analysis

The 8-hour chart shows the nearest resistance level at 73.65. If this can be penetrated decisively, the market could trade up to the 75.28 - 76.18 range. Alternatively, if the minor support level at 72.12 breaks, the market might trade down to yesterday's low at 70.60. However, the bullish rejection candle we identified in the daily oil technical analysis section above indicates that the market bias could be to the upside.

Oil Technical Analysis, Client Sentiment Graph

Client sentiment analysis

64% of clients trading USOIL are holding long positions, while 36% are holding short positions. Client sentiment data is being provided by TIO Markets Ltd.

Please note that retail client trading sentiment is generally a contrarian indicator, as private (non-professional) traders, on average, trade against market price trends. You can follow the TIOmarkets client sentiment live on our Forex dashboard.

The next key risk events impacting this market

  • OIL - US oil inventories
  • USD - Prelim UoM Consumer Sentiment
  • USD - Existing Home Sales
  • USD - Prelim UoM Inflation Expectations

Potential Oil Market Moves

Oil continues to consolidate inside a bullish triangle formation. The top of the triangle formation is at 76.18. If the triangle is resolved to the upside, we could see the market trading higher to the 72.33 - 80.62 range. A bearish breakout from could move the market down to 66.93.

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Janne MutaChief Market Analyst

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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