Crude Oil Price Update – Market Set-up for Volatile Reaction to EIA Report

January West Texas Intermediate crude oil futures are trading higher shortly before the regular session opening. Traders are reacting to an industry group report which showed a larger-than-expected draw down. According to the American Petroleum Institute, crude oil stocks fell by 7.4 million barrels during the week-ending December 8. However, gasoline stocks were up by 2.3 million barrels, and distillate inventories rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain, the API data showed.

At 1530 GMT, the U.S. Energy Information Administration’s weekly inventories report is expected to show a draw of 3.8 million barrels for the week-ending December 8. A bigger-than-expected draw will be bullish, however, the size of the gains will likely be determined by the gasoline and distillate numbers.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum shifted to the upside late last week with the formation of a closing price reversal bottom on December 7.

On Tuesday, the market posted a closing price reversal top, however, there has been no confirmation. A trade through $56.85 will confirm the chart pattern.

A trade through $58.56 will negate the chart pattern and could trigger a move into $58.88. A trade through this top will change the main trend to up. This is followed by another top at $59.05. A trade through this top could trigger an acceleration to the upside because the next target doesn’t come in until $63.95.

A move through $55.82 will reaffirm the downtrend with $55.00 the next likely target.

The main range is $55.00 to $59.05. Its retracement zone at $57.03 to $56.55 is new support. Holding above this zone will also help maintain the upside momentum.

Daily Technical Forecast

Today’s early inside move indicates trader indecision and that prices can move in either direction. It all depends on the EIA report.

Based on the early trade, the direction of the market today is likely to be determined by trader reaction to the pair of Gann angles at $57.82 and $57.88.

A sustained move under $57.82 will signal the presence of sellers. If the EIA report is bearish then we could see a break into $57.03, followed by an uptrending Gann angle at $56.82. The daily chart opens up further under this angle with targets at $56.55 and $56.32.

Overtaking a downtrending angle at $57.88 will indicate the presence of buyers. This could trigger a surge into a downtrending angle at $58.38, followed by yesterday’s closing price reversal top at $58.56 and another downtrending Gann angle at $58.63. This is the last potential resistance angle before the $58.88 and $59.05 main tops.