Crude Oil Price Update – Trade Through $37.11 Negates Reversal Bottom, Move Through $39.22 Confirms It

U.S. West Texas Intermediate crude oil is under pressure on Friday and in a position to close lower for a second consecutive week on growing demand worries and an unexpected rise in U.S. stockpiles that raised new concerns about oversupply. The U.S. benchmark is on track to lose about 6% this week.

At 12:55 GMT, December WTI crude oil is trading $37.60, down $0.51 or -1.34%.

The market has been under pressure all week starting with Saudi Arabia’s surprise move to cut prices on oil it supplies to Asia by $1.00 starting in October. Compounding the weakness was a second consecutive weekly decline in U.S. stock indexes as well as U.S. economic indicators that suggested a long and difficult recovery from the coronavirus pandemic.

Additionally, further dampening the market mood, the U.S. Senate killed a Republican bill that would have provided around $300 billion in new coronavirus aid. In another bearish sign, traders were starting to book tankers again to store crude oil and diesel, amid a stalled economic recovery at the COVID-19 pandemic continues.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the selling pressure has stalled after the formation of a closing price reversal bottom on September 9.

A trade through $39.22 will confirm the closing price reversal bottom and shift momentum to the upside. A move through $37.11 will negate the chart pattern and signal a resumption of the downtrend.

The main range is $25.31 to $44.33. Its retracement zone at $34.82 to $32.58 is the primary downside target. This may be a value zone so don’t be surprised if new buyers come into the market following a test of this area.

The new minor range is $44.33 to $37.11. Its retracement zone at $40.72 to $41.57 is a potential upside target.

Daily Swing Chart Technical Forecast

Based on the price action the past two sessions, the minor support is the closing price reversal bottom at $37.11 and the high at $39.22. Its 50% level at $38.17 appears to be controlling the direction of the market on Friday.

Trader reaction to $38.17 should set the tone in the market today.

Bearish Scenario

A sustained move under $38.17 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into $37.11.

Taking $37.11 could trigger an acceleration to the downside with the next targets the main bottom at $35.72 and the main 50% level at $34.82.

Bullish Scenario

A sustained move over $38.17 will signal the presence of buyers. This could lead to a test of $39.22.

Taking out $39.22 will confirm the closing price reversal bottom. This could trigger the start of a 2 to 3 day rally with the first target a 50% level at $40.72.