Concerns of tighter supplies have caused oil prices to rebound on Tuesday after two days of losses. News broke yesterday that crude production in Kazakhstan has been disrupted by maintenance on one of its major pipeline terminals.
The Central Asian nation, once part of the Soviet bloc, is home to the largest proven oil reserves in the Caspian Sea region. It announced Monday that "huge drops in intake to the Caspian Pipeline Consortium (CPC) pipeline" from two of its major fields could cut supply by 320,000 barrels a day until the end of April when scheduled work on the terminal should be complete.
The recent selloff was due to worries that harsher social restrictions in China amid a worsening COVID breakout would hit demand. As well, hopes for a Russia-Ukraine ceasefire improved the Russian oil production outlook if the talks taking place in Turkey prove to be successful.
These conflicting fundamental themes are also visible on WTI's technical chart, via the supply and demand dynamic.
Oil has been trading within a Symmetrical Triangle, a pattern expected to be bullish within the underlying rising trend. However, an upside breakout is required to complete the structure.
If that occurs, it should set a technical chain reaction in play that will likely push prices higher.
Trading Strategies
Conservative traders should wait for the upside breakout, then wait for a return move that successfully retests the support of the pattern.
Moderate traders would wait for a buying dip after an upside breakout, or if the price returns to the pattern's base for evidence of accumulation.
Aggressive traders could buy on either an upside breakout or a return to the pattern's bottom.
Trade Sample – Aggressive Long Position #1
- Entry: $97
- Stop-Loss: $96
- Risk: $1
- Target: $107
- Reward: $10
- Risk-Reward Ratio: 1:10
Trade Sample – Aggressive Long Position #2
- Entry: $115
- Stop-Loss: $110
- Risk: $5
- Target: $130
- Reward: $15
- Risk-Reward Ratio: 1:3
Author's Note: The above are just samples, not the actual analysis. Read the full text, so you understand that we do not predict the future. Rather a technical investigation weighs the available evidence and operates according perceived better chances, which work out if consistently trading for an extended period. Each trader must write their own trading plans to address their timing, budget, and temperament. Until that's possible, use our samples, but for learning, not for profit, or you'll end up with neither. Guaranteed. And there's no money back.