Crude Oil Price Update – Bullish Reaction to Hurricane Could Change Trend to Up on Weekly Chart

October West Texas Intermediate crude oil futures closed lower last week as investors continued to react to mixed fundamental news. On the bullish side of the equation, the U.S. government reported an eighth straight week of drawdowns. However, that news was offset by increased U.S. shale production.

At the end of the week, the market was supported by a weaker U.S. Dollar and the threat of a hurricane. The weaker dollar made dollar-denominated crude oil a more attractive commodity.

The U.S. petroleum industry in Texas braced for the arrival of Hurricane Harvey. This storm, which is being called the biggest to hit the U.S. mainland in more than a decade, has forced the oil industry to shutdown refineries, terminals, production platforms and other infrastructure.

Gasoline futures spiked higher on Friday because of supply concerns. This weighed on crude oil prices because of demand concerns. However, crude oil could spike higher if the hurricane causes a long-term disruption to oil field production.

Technical Analysis

The main trend is down according to the weekly swing chart. A trade through $50.51 will change the main trend to up. This will make $46.62 a new main bottom. If the rally is strong enough then traders may make a run at the next main top at $52.50.

The main range is $58.34 to $42.52. Its retracement zone at $50.43 to $52.29 is the primary upside target.

The short-term range is $42.52 to $50.51. Its retracement zone at $46.52 to $45.57 is the primary downside target. This zone provided supported two weeks ago when the selling stopped at $46.62.

Forecast

The direction of the crude oil market this week could be determined by trader and speculator reaction to the hurricane. If it’s perceived as a short-term term event then gains could be limited as well as any chance for a rally. If it turns into a long-term event then we could see a change in trend due to aggressive short-covering and speculative buying.

Based on the close at $47.87, the direction of the market this week is likely to be determined by trader reaction to the uptrending angle at $47.52.

Holding above $47.52 will indicate the presence of buyers. This could drive the market into a long-term downtrending angle at $49.84, followed by the 50% level at $50.43 and the main top at $50.51.

The trigger point for an acceleration to the upside is $50.51. If buying increases on this move then look for the rally to extend into at least $52.29 and $52.50.

A breakout over $52.50 could trigger a further rally into another long-term downtrending angle at $54.09 and the main top at $54.87.

A failure to hold $47.52 will signal the presence of sellers. This could drive the market into the short-term retracement zone at $46.52 to $45.57, followed by an uptrending angle at $45.02.

A bullish reaction to the hurricane could change the trend to up on the weekly chart for the first time this year.