Crude Oil Price Update – Trader Reaction to EIA Report, $39.36 Sets the Tone

U.S. West Texas Intermediate crude oil futures are trading higher shortly after the regular session opening on Wednesday, but giving back more than half of its earlier gains. The price action suggests investors are lightening up on the long-side ahead of today’s ISM U.S. Manufacturing PMI report at 14:00 GMT and the Energy Information Administration (EIA) weekly inventories report at 14:30 GMT.

At 12:13 GMT, August WTI crude oil futures are trading $39.42, up $0.15 or +0.38%. This is down from a high of $40.58.

Helping to drive the market higher earlier in the session was yesterday’s American Petroleum Institute’s (API) weekly inventories report that showed an unexpected 8.2 million barrel drawdown.

Today’s EIA report is expected to show a 900K draw. A bigger-than-expected draw down could trigger a rally into new intraday highs.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $41.63 will signal a resumption of the uptrend. A move through $37.08 will change the main trend to down.

The minor trend is also up. A move through $37.50 will change the minor trend to down. This will shift momentum to the downside.

The short-term range is $41.63 to $37.08. The market is currently trading on the strong side of its 50% level at $39.36.

The second short-term range is $34.66 to $41.63. Its 50% level at $38.15 is another potential support level.

The longer-term support is the 50% level at $37.50. The longer-term resistance is $41.56.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the August WTI crude oil the rest of the session on Wednesday is likely to be determined by trader reaction to $39.36.

Bullish Scenario

A sustained move over $39.36 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible retest of the intraday high at $40.58. Taking out this level could trigger an acceleration into the resistance cluster at $41.56 to $41.63.

Bearish Scenario

A sustained move under $39.36 will signal the presence of sellers. This could trigger an acceleration into the next 50% level at $38.15. This is followed by a series of potential support levels at $37.50, $37.08 and $36.63.

Side Notes

Look for heightened volatility with the release of the EIA inventories report at 14:30 GMT. A larger-than-expected draw down should be supportive.