Crude Oil Price Update – Strengthens Over $42.29, Weakens Under $41.72

U.S. West Texas Intermediate crude oil futures are edging higher early Tuesday on the hopes of a new U.S. fiscal stimulus package and reports of a rebound in Asian demand as economies reopen.

Traders cited three possible reasons for the early strength including signs of further stimulus measures as U.S. lawmakers continued negotiations on the massive virus relief economic package, a weaker U.S. Dollar and comments from Saudi Aramco that demand is improving.

At 06:54 GMT, September WTI crude oil is trading $42.02, up $0.08 or +0.19%.

On Monday, China reported that factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back towards pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $43.52 will signal a resumption of the uptrend. The main trend will change to down on a move through the nearest main bottom at $38.72.

The minor trend is also up. The minor trend changes to down on a trade through $41.06. This will also shift momentum to the downside.

The trade has been choppy the last four sessions with the market straddling a couple of retracement levels.

The major long-term 50% level at $41.72 is the key level to watch. It is controlling the longer-term direction of the market.

The first minor range is $43.52 to $41.06. Its 50% level at $42.29 is potential resistance.

The second minor range is $38.72 to $43.52. Its 50% level at $41.12 is potential support and also a potential trigger point for an acceleration to the downside.

The short-term range is $35.01 to $43.52. Its retracement zone at $39.27 is another potential support level.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $42.02, the direction of the September WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to the first minor pivot at $42.29.

Bullish Scenario

A sustained move over $42.29 will indicate the presence of buyers. If this move generates enough upside momentum then look for a possible surge into the minor top at $43.52. This is a potential trigger point for an acceleration to the upside since the daily chart indicates there is plenty of room to rally with the long-term Fibonacci level at $46.37 the next likely upside target.

Bearish Scenario

A sustained move under $42.29 will signal the presence of sellers. This could lead to a labored break with targets coming in at $41.72, $41.12 and $41.06.

We could see an acceleration to the downside if there is enough selling pressure to take out $41.06 with conviction.

Side Notes

Ultimately, the longer-term direction will be determined by trader reaction to $41.72. Additionally, watch for volatility at 20:30 GMT with the release of the American Petroleum Institute (API) weekly storage report.

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