Crude Oil Price Update – $40.63 to $41.50 Retracement Zone Controls Near-Term Direction

U.S. West Texas Intermediate crude oil futures are trading nearly flat early Wednesday after rebounding from Monday’s sell-off yesterday. Tuesday’s recovery was fueled by robust economic data from China. That news, however, was capped by returning supply to Norway, the U.S. Gulf of Mexico and Libya, and forecasts for a slow recovery in global oil demand as coronavirus cases rise.

At 0:36 GMT, December WTI crude oil is at $40.54, up $0.05 or +0.12%.

China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.75% from a year earlier, but still below the record high level of 12.94 mln bpd in June, customs data showed.

On the supply side, workers have been returning to U.S. Gulf of Mexico platforms after Hurricane Delta and Norwegian workers to offshore rigs after ending a strike. Meanwhile, Libya’s total output on Monday was expected to hit 355,000 bpd while a full return of the 300,000 bpd Sharara field would nearly double that.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $42.02 will change the main trend to up. A move through $36.93 will reaffirm the downtrend.

The minor trend is also down. The minor trend will change to up on a trade through $41.74. This will shift momentum to the upside.

The short-term range is $44.33 to $36.93. Its retracement zone at $40.63 to $41.50 is resistance. This zone is actually controlling the near-term direction of the market.

The minor range is $36.93 to $41.74. Its retracement zone at $39.34 to $38.77 is the primary downside target.

Daily Swing Chart Technical Analysis

The price action the past two sessions suggests that the direction of the market on Wednesday is likely to be determined by trader reaction to the short-term 50% level at $40.63.

Bullish Scenario

A sustained move over $40.63 will indicate the counter-trend buying is getting stronger. This could trigger an acceleration into the Fibonacci level at $41.50, followed closely by the minor top at $41.74 and the main top at $42.02.

Bearish Scenario

A sustained move under $40.63 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor bottom at $36.36, followed closely by the minor 50% level at $39.34.