Crude Oil Price Update – Trader Reaction to $41.83 Short-Term Pivot Sets the Tone

U.S. West Texas Intermediate crude oil futures are trading nearly flat on Thursday as the surge in coronavirus cases and tighter economic restrictions around the world stoked fears of another round of demand destruction, outweighing optimistic vaccine news.

At 07:10 GMT, January WTI crude oil futures are trading $41.97, down $0.04 or -0.10%.

Boosting worries about oversupply, Libya’s National Oil Corporation (NOC) and France’s Total discussed NOC’s efforts to raise capacity and increase production rates to the highest levels. Supporting prices, U.S. crude inventories rose 768,000 barrels last week, less than analyst expectations. Meanwhile, distillate stockpiles fell by 5.2 million barrels, far exceeding expectations.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $43.33 will reaffirm the uptrend. A move through $40.33 will change the main trend to down.

The minor range is $43.33 to $40.33. The market is currently straddling its 50% level at $41.83, indicating trader indecision.

The main range is $44.59 to $34.04. Its retracement zone at $40.56 to $39.32 is support. This zone is controlling the near-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the January WTI crude oil futures contract is likely to be determined by trader reaction to $41.83.

Bullish Scenario

A sustained move over $41.83 will indicate the presence of buyers. The first upside target is yesterday’s high at $42.68. A breakout over this level will target the main top at $43.33. If this top is taken out then look for the rally to possibly extend into the August 26 top at $44.59.

Bearish Scenario

A sustained move under $41.83 will signal the presence of sellers. If this creates enough downside momentum then look for a test of the support cluster at $40.56 to $40.33. Buyers could come in on the first test of this area, but if it fails then look for the selling to possibly accelerate into $39.32.

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