Crude Oil Price Update – Starting to Strengthen on Bullish Side of $71.85 to $70.54 Retracement Zone

U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Wednesday after government data showed U.S. crude inventories fell more sharply than analysts had forecast, shifting the market’s focus back to tight supplies rather than on potential demand destruction due to rising coronavirus infections.

At 19:08 GMT, September WTI crude oil futures are trading $72.29, up $0.64 or +0.89%.

According to U.S. Energy Information Administration (EIA) data released at 14:30 GMT on Wednesday, weekly crude oil inventories fell by 4.1 million barrels in the week to July 23. Gasoline and distillate fuel stocks also dropped.

In other news, a rising number of coronavirus cases worldwide, despite vaccination programs, has limited the upside for oil and remains a concern as investors fear the demand destruction it could bring to the global economy.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of a closing price reversal bottom on July 20.

A trade through $74.90 will change the main trend to up. A move through $65.01 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The minor trend is up. It changed to up earlier today when buyers took out $72.43. This move confirmed the shift in momentum to up. A trade through $70.56 will change the minor trend to down.

The main range is $76.07 to $65.01. WTI crude oil is currently trading on the strong side of its retracement zone at $71.85 to $70.54, making it potential support.

The short-term range is $65.01 to $72.60. If the minor trend changes to down then look for the selling to possibly extend into its retracement zone at $68.81 to $67.91.

Daily Swing Chart Technical Forecast

The direction of the September WTI crude oil futures contract into the close is likely to be determined by trader reaction to $71.85.

Bullish Scenario

A sustained move over $71.85 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into the first main top at $74.90 over the short-run.

Bearish Scenario

A sustained move under $71.85 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the support cluster at $70.56 to $70.54.

The 50% level at $70.54 is a potential counter-trend support level, but it’s also the trigger point for an acceleration into the short-term retracement zone at $68.81 to $67.91.