Crude Oil Price Update – Close Under $62.96 Forms Potentially Bearish Closing Price Reversal Top

West Texas Intermediate crude oil futures are trading higher Wednesday shortly after the release of the U.S. Energy Information Administration’s weekly inventories report. The market rallied to a multi-year high at $63.67, but is now trading below the opening. Although momentum is still pointed to the upside, the intraday price action suggests the market may be nearing overbought territory.

At 1608 GMT, February WTI crude oil is trading $63.32, up $0.36 or +0.57%.

According to the EIA, U.S. crude oil inventories fell by 4.9 million barrels in the week to January 5, compared with analysts’ expectations for a fall of 3.9 million barrels. Crude stocks at the Cushing, Oklahoma delivery hub fell by 2.4 million barrels, the EIA said.

Gasoline stocks rose by 4.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.6 million-barrel gain. Distillate stockpiles, which include diesel and heating oil, rose by 4.3 million barrels, versus expectations for a 1.5 million-barrel increase, the EIA data showed.

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high of $63.67 will indicate the buying is getting stronger. The next target is the major long-term 50% level at $64.02. Traders may decide to start taking profits on the first test of this level.

On the downside, minor support is a former bottom at $62.02. This price was the trigger point for this week’s surge so if the market breaks below this level, it will signal the return of sellers.

Daily Forecast Analysis

Based on the current price action, the direction of the crude oil market the rest of the session will be determined by trader reaction to yesterday’s close at $62.96.

A sustained move over $62.96 will indicate the presence of buyers. This could create the upside momentum to overtake $63.67 then challenge $64.02.

A sustained move under $62.96 will signal the presence of sellers. This will also put the market in a position to post a potentially bearish closing price reversal top. If confirmed, this chart pattern could trigger the start of a 2 to 3 day correction.