Crude Oil Price Update – $59.01 is Trigger Point for Acceleration to Upside

U.S. West Texas Intermediate crude oil futures are trading higher early Wednesday after an industry report showed a larger-than-expected weekly inventory draw. Oil prices are also being supported by the growing tensions between the United States and Iran that continue to threaten the world’s transport of crude. Traders now await the release of the U.S. Energy Information Administration report on crude oil inventories on Wednesday at 14:30 GMT.

At 03:01 GMT, September WTI crude oil is trading $58.74, up $0.80 or +1.38%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on July 3 at $56.13.

A trade through $60.32 will change the main trend to up. This is a potential trigger point for an acceleration to the upside. A move through $56.13 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The current two-week rangebound trade is being controlled by a pair of 50% to 61.8% retracement zone.

The main range is $65.92 to $50.91. Its retracement zone is $58.41 to $60.18. The next range is $64.02 to $50.91. Its retracement zone is $57.47 to $59.01. The market has been straddling both zones since June 21.

The short-term range is $50.91 to $60.32. Its retracement zone at $55.62 to $54.50 is support.

Daily Swing Chart Technical Forecast

Based on Tuesday’s price action and the current price at $58.74, the direction of the September WTI crude oil futures contract on Wednesday is likely to be determined by trader reaction to the Fibonacci level at $59.01.

Bullish Scenario

A sustained move over $59.01 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for the rally to possibly extend into the main Fibonacci level at $60.18, followed closely by the main top at $60.32. This top is the trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $59.01 will signal the presence of sellers. The trigger point for an acceleration to the downside is the main 50% level at $58.41. If this level fails as support then look for the selling to possibly extend into the short-term 50% level at $57.47.

Breaking through $57.47 could also trigger an acceleration to the downside with the next targets a main bottom at $56.13 and the short-term 50% level at $55.62.

Overview

Rising U.S. production and lower demand seem to be offsetting the OPEC-led supply cuts. Therefore, we have to conclude that an escalation of tensions in the Middle East will likely be the catalyst to drive the market out of this trading range.