Crude Oil Price Update – Giving Back Previous Day’s Gains as Supply Disruption Concerns Ease

U.S. West Texas Intermediate crude oil futures are trading lower late in the session on Friday after giving back all of the previous session’s speculative gains tied to worries about a supply disruption in the Gulf of Mexico.

On Thursday, top U.S. Gulf of Mexico oil producer Shell said it halted production at three deepwater platforms in the region. The three platforms are designed to produce up to 410,000 barrels of oil per day combined.

At 18:58 GMT, September WTI crude oil futures are trading at $92.00, down $2.34 or -2.48%. The United States Oil Fund ETF (USO) is at $74.97, down $1.31 or -1.72%.

Prices plunged on Friday on expectations that supply disruptions in the U.S. Gulf of Mexico would be short-term, while recession fears clouded the demand outlook.

In other news, U.S. oil rigs rose three to 601 this week, energy services firm Baker Hughes Co said. The rig count, an indicator of future output, has been slow to grow with oil production only seen recovering to pre-pandemic levels next year.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on August 5.

A trade through $87.01 will negate the chart pattern and signal a resumption of the downtrend. A move through $101.88 will change the main trend to up.

The minor trend is up. This is supporting the upside momentum. A trade through $87.66 will change the minor trend to down. A move through $95.05 will signal the return of buyers.

The short-term range is $101.88 to $87.01. Its pivot at $94.45 is resistance. This level stopped the rally on Thursday and Friday.

On the downside, the major support is the long-term retracement zone at $89.54 to $82.80. On the upside, the next resistance is a 50% level at $99.22.

Short-Term Outlook

Trader reaction to the short-term pivot at $94.45 is likely to determine the direction of the September WTI crude oil market into the close on Friday.

Bearish Scenario

A sustained move under $94.45 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to extend into $89.54.

Bullish Scenario

Recapturing $94.45 will indicate the return of buyers. Taking out the minor top at $95.05 could trigger an acceleration to the upside.