Crude Oil Price Update – Trader Reaction to $73.08 – $73.79 Determines Short-Term Direction

U.S. West Texas Intermediate crude oil futures are edging higher early Tuesday, bouncing back from yesterday’s loss, as expectations of further declines in U.S. crude inventories outweighed fears that spreading COVID-19 variants could derail a global economic recovery.

Optimism over tight supply and declining U.S. crude stockpiles are underpinning prices ahead of Tuesday’s American Petroleum Institute’s (API) and Wednesday’s Energy Information Administration (EIA) weekly storage reports.

At 04:08 GMT, September WTI crude oil futures are trading $73.63, up $0.19 or +0.26%.

U.S. crude inventories were expected to fall for an eighth consecutive week, while gasoline stocks also declined, a preliminary Reuters poll showed on Monday.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the reversal bottom on July 8. A trade through $76.07 will change the main trend to up. A move through $70.10 will negate the reversal bottom and signal a resumption of the downtrend.

The minor range is $76.07 to $70.10. The market is currently testing its retracement zone at $73.08 to $73.79. Trader reaction to this zone will determine the near-term direction of crude oil. Aggressive counter-trend buyers are trying to drive the market through $73.79. Trend traders are trying to stop the rally in an effort to form a potentially bearish secondary lower top.

On the downside, potential retracement level targets come in at $71.96 and $70.33.

Daily Swing Chart Technical Forecast

The direction of the September WTI crude oil market on Tuesday is likely to be determined by trader reaction to $73.08 and $73.79.

Bearish Scenario

A sustained move under $73.08 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into $71.96. This is a potential trigger point for an acceleration to the downside with $70.33 to $70.10 the next likely target area.

Bullish Scenario

A sustained move over $73.79 will signal the presence of buyers. The first target is $74.15. Taking out this level on strong volume could trigger an acceleration to the upside with $76.07 the next potential target.