Crude Oil Price Update – Needs to Hold $42.62 to Sustain Short-Term Upside Bias

U.S. West Texas Intermediate crude oil futures are edging higher early Wednesday after a bigger-than-expected draw in U.S. crude stockpiles according to an industry report and as solid U.S. and Chinese factory activity fueled optimism of a recovery from the pandemic, boosting investor demand for riskier assets.

At 04:42 GMT, October WTI crude oil futures are trading $43.10, up $0.34 or +0.80%.

U.S. crude inventories fell by 6.4 million barrels in the week to August 28 to about 501.2 million barrels, the American Petroleum Institute (API) said, against analysts’ expectations for a draw of 1.9 million barrels.

Gasoline stocks also fell by 5.8 million barrels, more than analysts’ estimates of a draw of 3.0 million barrels. Analysts had forecast a sixth weekly drawdown in U.S. crude inventories in a Reuters poll.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $43.78 will signal a resumption of the uptrend after four sessions of sideways trading. A trade through $41.46 will change the main trend to down.

The minor trend is also up. A trade through $42.36 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is $41.46 to $43.78. Its 50% level at $42.62 is minor support.

The major support is the long-term 50% level at $42.01.

The short-term range is $39.00 to $43.78. If the main trend changes to down then look for a move into its retracement zone at $41.40 to $40.84.

Daily Swing Chart Technical Forecast

The price action the last four sessions indicates that the short-term direction of the October WTI crude oil market is likely to be determined by trader reaction to the minor 50% level at $42.62.

Bullish Scenario

A sustained move over $42.62 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for the rally to possibly extend into the minor top at $43.78. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $42.62 will signal the presence of sellers. Taking out $42.36 will shift the momentum to the downside, which should lead to a test of the major support at $42.01.

The tone of the market will shift to slightly bearish on a close under $42.01.

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