Crude Oil Price Update – Testing Lower-End of RT Zone While Traders Search for Value

U.S. West Texas Intermediate crude oil futures are under pressure on Monday as investors react to the start of the sanctions against Iran. As recently as October 3, sentiment was bullish as investors expected the sanctions to cause a supply shortage, however, this thinking changed when the United States, Saudi Arabia and Russia decided to ramp production high enough to reach one-third of daily global demand. Additional pressure was put on prices after the United States announced it was giving exemptions from the sanctions to eight countries or “territories”. This brought additional supply into the market.

At 1300 GMT, December WTI crude oil futures are trading $63.12, down $0.02 or -0.03%.

Despite technically oversold conditions, crude oil is likely to continue to remain under pressure until the market reaches a value area or the U.S. lifts the exemptions.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The market isn’t close to turning the main trend to up, but due to the prolonged move down in terms of price and time, it can turn at any time with the formation of a potentially bullish closing price reversal bottom.

The next downside target is the June 18 main bottom at $62.32. Under this level is a steep drop-off with the target the April 4 main bottom at $59.70.

The December 2017 to November 2018 range is $54.18 to $76.72. Its 50% to 61.8% retracement zone is $65.45 to $62.79. Earlier today, the market broke through the lower or Fibonacci level at $62.79. This indicated the selling was getting stronger.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December WTI crude oil futures contract is likely to be determined by trader reaction to the Fibonacci level at $62.79.

A sustained move under $62.79 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to extend into $62.32. This is a potential trigger point for an acceleration into $59.70.

A sustained move over $62.79 will signal the presence of buyers. Overtaking $63.14 will turn the market higher and put crude oil in a position to form a closing price reversal bottom. This could trigger the start of a 2 to 3 day counter-trend rally.

Longer-term, the market opens today’s session on the weak side of the 200-Day Moving Average. This comes in at $65.38. Don’t expect much of an upside move until buyers can sustain a move over this indicator.