Crude Oil Price Update – Strengthens Over $41.83, Weakens Under $40.33

U.S. West Texas Intermediate crude oil futures are inching lower early Wednesday after posting a modest gain the previous session on below average volume. The market is being pressured by a private industry report showing a bigger-than-expected build in U.S. crude stockpiles that stoked fears for weak fuel demand and a potential supply glut. Hopes that OPEC and its allies will postpone a planned January increase to oil production underpinned prices.

At 06:48 GMT, January WTI crude oil futures are trading $41.49, down $0.16 or -0.38%.

Late Tuesday, the American Petroleum Institute (API) said that U.S. crude inventories rose by 4.2 million barrels last week, well above analysts’ expectations in a Reuters poll for a build of 1.7 million barrels.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $43.33 will reaffirm the uptrend. A move through $34.04 will change the main trend to down. This is highly unlikely but there is room for a normal 50% to 61.8% correction of the current rally.

The minor trend is also up. A trade through $40.33 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is $43.33 to $40.33. Its 50% level at $41.83 is resistance. The direction the rest of the week is likely to be determined by trader reaction to this level.

The main range is $44.59 to $34.04. Its retracement zone at $40.56 to $39.32 is controlling the near-term direction of the market. Trading above this zone makes it support.

The short-term range is $34.04 to $43.33. If the main retracement zone fails then look for a test of its retracement zone at $38.69 to $37.59. Since the main trend is up, buyers are likely to come in on a test of this area.

Daily Swing Chart Technical Forecast

The direction of the January WTI crude oil futures contract on Wednesday is likely to be determined by trader reaction to $41.83.

Bearish Scenario

A sustained move under $41.83 will indicate the presence of sellers. This could lead to a retest of $40.56 to $40.33. If the latter fails to hold then look for the selling to extend into $49.32.

Bullish Scenario

Overtaking and sustaining a rally over $41.83 will signal the presence of buyers. If this creates enough upside momentum then look for an eventual retest of $43.33 over the near-term.