Crude Oil Price Update – Holding $71.61 Could Trigger Rally to $73.55

U.S. West Texas Intermediate crude oil futures are trading slightly better early Wednesday. However, the price action has been limited by low volume ahead of today’s U.S. Energy Information Administration’s (EIA) weekly inventories report, due to be released at 1430 GMT.

Today’s early strength is being fueled by momentum created by Tuesday’s higher close. Prices rose yesterday after the weekly American Petroleum Institute (API) report surprisingly showed U.S. crude inventories fell by 2.13 million barrels during the week-ending October 12. Analysts were looking for an inventory build of 2.167 million barrels.

At 0612 GMT, December WTI crude oil is trading $71.90, up $0.14 or +0.22%.

Today’s EIA report is expected to show a 1.6 million barrel build, however, this forecast could change due to the API number.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $70.37 will indicate the selling is getting stronger. A move through $67.74 will change the main trend to down.

The minor trend is down. This is why the momentum shifted to the downside. A trade through $75.16 will change the minor trend to up and change momentum to up.

The market has been trading inside the wide range formed on October 11 for four sessions. The high of the range is $72.63. The low of the range is $70.37. This formation tends to indicate trader indecision and impending volatility. Taking out $72.63 will make $70.37 a new minor bottom.

The main range is $66.50 to $76.72. Its retracement zone is $71.61 to $70.37. This zone is controlling the near-term direction of the market. Holding above this zone will give crude oil an upside bias.

The short-term range is $76.72 to $70.37. If today’s early strength creates enough upside momentum, we could see a move into the short-term retracement zone at $73.55 to $74.29.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December WTI Crude Oil market on Wednesday is likely to be determined by trader reaction to the main 50% level at $71.61.

A sustained move over $71.61 will indicate the presence of buyers. Taking out $72.63 could trigger a spike into at least $73.55.

A sustained move under $71.61 will signal the presence of sellers. If the selling momentum is strong enough, we could see a drive into $70.40 then $70.37. The latter could be the trigger point for an acceleration to the downside. There is no major support under this level until $67.74.