Crude Oil Price Update – EIA Report Expected to Show 2.4M Draw

July West Texas Intermediate crude oil futures are trading flat shortly ahead of the regular session opening. The market is being supported by a friendly American Petroleum institute weekly inventory report.

According to the API, crude oil had a draw down that was less than expected, but prices were boosted by drawdowns in gasoline, distillates and oil at the Cushing, Oklahoma hub. At 1430 GMT, the U.S. Energy Information Administration report is expected to show a 2.4 million barrel draw down.

The news of a possible nine-month extension of the OPEC-led plan to cut production is widely expected to be approved by OPEC on May 25. However, bullish traders are hoping the cartel approves a deepening of the output cuts.

Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has shifted to the upside.

The market is currently straddling a major 50% level at $51.68.

On the downside, support comes in at $50.51 and $49.29.

Forecast

Based on the current price at $51.46 and the earlier price action, the direction of the crude oil market today is likely to be determined by trader reaction to the major 50% level at $51.68.

A sustained move over $51.68 will signal the presence of buyers. This could trigger an acceleration into the downtrending angle at $52.64. Overtaking this angle will signal $53.54. This is the last potential resistance angle before the $54.45 main top.

A sustained move under $51.68 will indicate the presence of sellers. This would put the market in a weak position and could trigger a move into a support cluster at $50.83, $50.63 and $50.51. We could see a technical bounce on the first test of these level.

We could see an acceleration to the downside if $50.51 fails as support with $49.29 the next likely downside target.

Watch the price action and read the order flow at $51.68 today. Trader reaction to this level will set the tone for the day.