Crude Oil Price Update – Next Major Move Determined by Trader Reaction to $27.40 – $26.04 Retracement Zone

U.S. West Texas Intermediate crude oil futures are trading lower into the close on Tuesday with the price action indicating traders feel the OPEC+ production cuts will fall well-short of offsetting the demand destruction from the coronavirus pandemic.

Global oil producers worldwide are expected to cut overall output by roughly 19.5 million barrels per day, or nearly 20% of world supply, according to Reuters. However, those commitments – which include voluntary cuts that will happen gradually in places like the United States – will not be enough to reduce the growing worldwide supply glut.

At 20:24 GMT, June WTI crude oil is trading $27.96, down $1.32 or -4.51%.

American Petroleum Institute Weekly Inventories

U.S. crude stockpiles were forecast to have risen last week for a 12^th straight week, according to analysts polled ahead of the API weekly report due to be released at 20:30 GMT on Tuesday. Traders are pricing in an increase of 12.1 million barrels.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $33.15 will change the main trend to up.  A move through the last swing bottom at $21.64 will signal a resumption of the downtrend.

The minor trend is up, but momentum is trending lower. A trade through the two minor bottoms at $23.31 and $22.74 will change the minor trend to down and reaffirm the shift in momentum.

The main range is $48.92 to $21.64. Its retracement zone at $35.28 to $38.50 is resistance.

The short-term range is $21.64 to $33.15. Its retracement zone at $27.40 to $26.04 is the primary downside target. The top of this range was touched on Tuesday.

Short-Term Outlook

Holding $27.40 will indicate the presence of counter-trend buyers. This could fuel a short-covering rally, but not necessarily a change in the trend.

A break through $27.40 will indicate the selling is getting stronger. This could lead to a test of the Fibonacci level at $26.04. This is a potential trigger point for an acceleration to the downside.