Crude Oil Price Update – Bearish EIA Report Could Trigger Break into $38.15 to $37.50

U.S. West Texas Intermediate crude oil futures are under pressure shortly before the release of a weekly government inventories report at 14:30 GMT. The report is expected to show a small build in crude oil inventory. However, the focus for traders is likely to be on the gasoline and distillate numbers since they are strongly correlated with the reopening of the economy.

At 14:07 GMT, August WTI crude oil is trading $39.51, down $0.86 or -2.13%.

The U.S. Energy Information Administration (EIA) report is expected to show a 1.2 million barrel build.

A rising number of coronavirus cases in the United States, China, Latin America and India is rattling investors. Storage facilities around the world are almost full and if a second wave of the pandemic hits demand, they will struggle to cope with the unused oil, analysts say.

Late Tuesday, the American Petroleum Institute (API) reported a bitter-than-expected rise in U.S. crude inventories, but gasoline and distillate inventories fell, suggesting consumption was picking up as lockdowns were eased.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. Momentum shifted on Tuesday with the formation of the closing price reversal top and the subsequent confirmation earlier today.

A trade through $41.63 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $34.66.

The minor trend is also up. A trade through $37.40 will change the minor trend to down. This will confirm the shift in momentum to down.

The main range is $54.71 to $20.28. Its retracement zone at $37.50 to $41.56 is controlling the longer-term direction of the market. Crude oil is currently trading inside this zone.

The short-term range is $34.66 to $41.63. Its 50% level at $38.15 is another potential downside target.

Daily Swing Chart Technical Forecast

The closing price reversal top at $41.63 has shifted momentum to the downside. If today’s EIA report is bearish then look for the selling to continue into $38.15 to $37.50.

A bullish EIA report could trigger a short-covering rally with the first target coming in at $40.46 then the resistance cluster at $41.56 to $41.63. Taking out $41.63 could trigger an acceleration to the upside.

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