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James Hyerczyk
WTI Crude Oil

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 December WTI Crude Oil

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.

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