Crude Oil Price Update – Trade to $42.49 Fills Gap Formed in MarchThe strong close has put September WTI crude oil in a position to challenge the resistance cluster at $41.72 to $41.74, followed by $42.49.
U.S. West Texas Intermediate crude oil finished higher on Wednesday after a government report showed U.S. crude oil and refined product inventories fell sharply last week due to a notable drop in crude imports.
According to the U.S. Energy Information Administration, crude inventories fell 7.5 million barrels in the week to July 10 to 531.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.1 million barrel drop. The decline was driven by a steep drop in imports, which fell by a net 2 million barrels per day (bpd), the EIA said.
On Wednesday, September WTI crude oil futures settled at $41.40, up $1.08 or +2.68%.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Wednesday when buyers took out the previous main top at $41.19. A trade through $38.77 will change the main trend to down.
The minor trend is also up. A trade through $39.31 will change the minor trend to down. This will also shift momentum to the downside.
On the upside, the first resistance is the long-term 50% level at $41.72. This is followed by $42.49 or the top of the gap formed in March.
On the downside, the first support is a 50% level at $39.53. This is followed by a short-term retracement zone at $38.38 to $37.58.
The close on the high of the session on Wednesday indicates the upside momentum is strong. Traders could be betting on rising demand as the economy continues to recover from the coronavirus pandemic.
OPEC+ is moving to the next phase of its oil cut pact when the group is expected to ease their reductions as oil demand recovers. Traders are acting as if they expect only a partial restoration of production.
The strong close has put September WTI crude oil in a position to challenge the resistance cluster at $41.72 to $41.74. This price area should act like resistance on the first test, but taking it out should lead to a quick test of $42.49. This is a potential trigger point for an acceleration to the upside with $46.37 the next major upside target over the near-term.
Weakness could develop and prices could retreat into a series of potential levels at $39.53, $38.77, and $38.38 over the near-term if OPEC+ tapers its production cuts by more than expected.