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James Hyerczyk
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WTI Crude Oil

U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Tuesday, helped by a huge rally in the U.S. equity market and bargain-hunters buying up relatively cheap oil. The price action suggests that traders may be downplaying the impact of the rapidly spreading COVID Delta, but chances are we’re just looking at a short-covering rally due to temporary oversold conditions.

The bottom-line is that we don’t know any more about the possible demand destruction due to the rise in infections today than we did yesterday. And the way the virus is spreading, conditions are likely to get worse before they get better.

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At 18:59 GMT, September WTI crude oil is trading $67.40, up $1.05 or +1.58%.

The market may have reached a value zone, but since a support base hasn’t formed, any rally is likely to be short-lived.

At 20:30 GMT, the American Petroleum Institute (API) will release its weekly inventories report. Traders are looking for a 4.6 million barrel draw, but it’s the gasoline number that traders will be most interested in.

Daily September WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $61.06 will reaffirm the downtrend. The main trend will change to up on a trade through the nearest main top at $74.90.

The market is currently in a position to form a closing price reversal bottom. This won’t change the trend to up, but if confirmed, it could trigger the start of a 2 to 3 day correction. Typically, it indicates the buying is greater than the selling at current price levels.

The main range is $56.62 to $76.07. Its retracement zone at $66.35 to $64.05 was tested earlier today. The price action following a test of this zone suggests traders may have identified it as a value area.

The minor range is $74.90 to $65.01. Its 50% level at $69.96 is the first upside target. This is followed by a second target zone at $70.54 to $71.85. The best upside target area is a pair of 50% levels at $69.96 to $70.54.

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Daily Swing Chart Technical Forecast

The direction of the September WTI crude oil market into the close on Tuesday is likely to be determined by trader reaction to $66.35.

Bullish Scenario

A sustained move over $66.35 will indicate the presence of buyers. If the market closes over this level then look for a possible 2 to 3 day rally into at least $69.96 to $70.54.

Bearish Scenario

A sustained move under $66.35 will signal the presence of sellers. This will indicate that the intraday rally was driven by short-covering rather than new buying. It could also indicate that traders will have to establish a support base inside $66.35 to $64.05 before moving higher.

For a look at all of today’s economic events, check out our economic calendar.
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