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James Hyerczyk
WTI Brent Crude Oil

U.S. West Texas Intermediate crude oil futures finished slightly higher on Tuesday ahead of tomorrow’s weekly U.S. inventory figures, rebounding modestly from the previous day’s steep break that was driven by a surge in overseas coronavirus infections. The market was helped by a private industry report that showed a large gasoline draw despite an unexpected crude inventory build.

On Tuesday, December WTI crude oil settled at $40.09, up $0.24 or 0.60%.

Late Tuesday, the American Petroleum Institute (API) reported a build in crude oil inventories of 691,000 barrels for the week-ending September 18. Analysts were looking for an inventory draw of 2.256-million barrels.

The API also reported a draw in gasoline inventories of 7.735 million barrels of gasoline for the week-ending September 11 – compared to last week’s 3.762-million-barrel build. Analysts had expected a much smaller 614,000-barrel draw for the week.

Distillate inventories were down by 2.104 million barrels for the week, compared to last week’s 1.123-million-barrel draw, while Cushing inventory rose by 298,000 barrels.

Daily December WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending a little higher. A trade through $37.11 will signal a resumption of the downtrend. The main trend will change to up when buyers take out $44.33.

The minor trend is also down. A trade through $42.02 will change the minor trend to up. This move will confirm the shift in momentum to up.

The short-term range is $44.33 to $37.11. Its retracement zone at $40.72 to $41.57 is potential resistance.

The minor range is $37.11 to $42.02. Its retracement zone at $39.57 to $38.99 is support. It stopped the selling at $39.21 on Monday.

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Short-Term Outlook

Holding between the two retracement zones will produce a rangebound trade. On the upside, the trigger point for an acceleration is the Fibonacci level at $41.57. Taking out the Fibonacci level at $38.99 could trigger an acceleration to the downside. The daily chart indicates there is plenty of room to the downside with the next major target the September 9 main bottom at $37.11.

Why is a rangebound trade possible? Because some traders believe renewed lockdown restrictions in Europe will have only a limited impact on fuel demand, which could prevent a pronounced selloff in oil markets. Additionally, with major oil-producing nations still restricting supply, the market has been locked in a range for most of the summer. This time, it is likely to be at lower prices.

For a look at all of today’s economic events, check out our economic calendar.
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