What’s the Critical Support and Resistance for Crude Oil?



Critical support and resistance for crude oil

On April 22, US crude oil closed at $43.73—1.2% higher compared to the previous trading session on a closing basis. A lower rise in inventories and increasing gasoline consumption in the US were the main drivers of the gain in crude oil. The next immediate resistance for crude is around $45.07. The price level of $41.4 will be the key support for crude oil futures. During the release of the American Petroleum Institute and the U.S. Energy Information Administration’s inventory data, crude futures could react near these technical levels.

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The price levels of $41.40 and $45.05 are the respective 61.8% and 76.4% retracement levels for crude futures from the high of $50.92 on October 9, 2015, to the low of $26.05 on February 11, 2016. In the past, these Fibonacci technical levels served as important support and resistance for crude oil prices. For example after Mohammad Bin Salman Al-Saud’s—Saudi Arabia’s deputy crown prince—interview about the success of the production freeze talk on March 31, 2016, crude broke below $38.5. After Kuwait reaffirmed the success of the production freeze talk, crude oil (UCO) rebounded from $35.5. The price levels of $38.5 and $35.5 are 50% and 38.2% of the Fibonacci retracement levels.

Moving averages

On April 22, 2016, crude oil futures were 21.5% and 9.4% above the 100-day and 20-day moving average. The above graph shows crude’s future price performance relative to its moving averages.

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ETF performance

Currently, the United States Oil (USO) is trading around 8% above its 100-day moving average and 7% above its 20-day moving average.

Oil-weighted stock

When crude oil reacts to these technical levels, it’s an important price cue for oil-weighted stocks like Oasis Petroleum (OAS), Triangle Petroleum (TPLM), and Denbury Resources (DNR).


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