Crude Oil Price Update – Is a Closing Price Reversal Bottom Forming?

July West Texas Intermediate crude oil futures spiked to the downside early in the session on Thursday but at the mid-session is trying to recover most of those losses. The catalyst behind the early sell-off was the unexpected surge in U.S. inventories as reported by the U.S. Energy Information Administration on Wednesday and the return of more Nigerian crude to the market.

The only fresh news today was Royal Dutch Shell’s decision to lift the force majeure on exports of Nigeria’s Forcados crude, bringing all the country’s oil grades fully online for the first time in 16 months.

Technical Analysis

The main trend is down according to the daily swing chart. Momentum is also trading lower. If the momentum continues then traders are likely to go after the May 5 bottom at $44.13. Taking out this bottom will signal a continuation of downtrend.

The main range is $44.13 to $52.00. Trading below its retracement zone at $47.14 to $48.07 is also giving the market the downside bias. This is zone is also resistance.

Forecast

July WTI crude oil took out then overcame an uptrending angle at $45.57 on Thursday. Trader reaction to this angle will help determine the direction of the market into the close.

Traders should also watch the reaction to yesterday’s close at $45.72. Closing over this price will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day short-covering rally.

A close under $45.72 will put the market in a position to challenge the next angle at $44.85. This is the last potential support angle before the $44.13 main bottom.

I think the key price to watch into the close is $45.72. Closing over this level will tell us that the buying is greater than the selling at current price levels.