Crude Oil Price Update – Trader Reaction to $71.85 Fib Level Sets the Tone Ahead of API Inventories Report

U.S. West Texas Intermediate crude oil futures are trading slightly lower late in the session on Tuesday as traders await a key private industry report that could shed some light on the domestic supply situation. Meanwhile, the inside trading range suggests investor indecision and impending volatility. Buyers and sellers continue to battle it out in a tight trading range with the bulls betting on tighter supplies amid a steady rise in the vaccination rate, and bearish traders worried that global demand could be dented by surging COVID-19 cases.

At 19:02 GMT, September WTI crude oil is trading $71.63, down $0.28 or -0.39%.

At 20:30 GMT, the American Petroleum Institute (API) will release its weekly inventories report. Analysts polled by Reuters expected the data to show U.S. crude stocks fell by about 3.4 million barrels and gasoline stocks fell by 400,000 barrels in the week to July 23. The U.S. Energy Information Administration (EIA) will release its report on Wednesday at 14:30 GMT.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of a closing price reversal bottom on July 20. A trade through $74.90 will change the main trend to up. A move through $65.01 will signal a resumption of the downtrend.

The minor trend is also down. The new minor top is $72.43.

The main range is $76.07 to $65.01. The market is currently straddling the upper level of its retracement zone at $70.54 to $71.85. Trader reaction to this zone will determine the near-term direction of the market. Trend-trading sellers are trying to form a potentially bearish secondary lower top.

The short-term range is $65.01 to $72.43. Its retracement zone at $68.72 to $67.84 is the primary downside target. I think this zone has to be tested so buyers could form a potentially bullish secondary higher bottom.

Daily Swing Chart Technical Forecast

The direction of the September WTI crude oil market into the close on Tuesday is likely to be determined by trader reaction to $71.85.

Bullish Scenario

A sustained move over $71.85 will indicate the presence of buyers. The first upside target is $72.43. This is a potential trigger point for an acceleration to the upside with the next major targets coming in at $74.90 and $76.07.

Bearish Scenario

A sustained move under $71.85 will signal the presence of sellers. This could trigger a quick break into $70.54. Taking out this level could trigger a plunge into the short-term retracement zone at $68.72 to $67.84.