Crude Oil Price Update – Trend Down, Momentum Up; Strenghtens Over $79.29, Weakens Under $78.09

U.S. West Texas Intermediate crude oil futures are trading sharply higher late Tuesday after a move by the United States and other major oil consuming countries to release tens of millions of barrels of oil from reserves to try to cap prices fell short of some expectations.

At 19:17 GMT, January WTI crude oil futures are trading $78.63, up $1.88 or +2.45%.

The U.S. announcement was for a release of 50 million barrels, the equivalent of about two and a half days of U.S. demand. India, meanwhile, said it would release 5 million barrels, while Britain said it would allow the voluntary release of 1.5 million barrels of oil from privately held reserves.

As I mentioned the other day, the announcement was telegraphed and probably priced into the market for days. This means it will have a limited effect on prices. Furthermore, OPEC and its allies still have the option of off-setting the move by lower its production targets when it holds its policy meeting on December 2.

Crude oil prices are rallying shortly before the release of a weekly inventories report from the American Petroleum Institute (API) at 21:30 GMT on Tuesday. On Wednesday the U.S. Energy Information Administration (EIA) will release its oil inventory data. Both reports are expected to show a 1.0 million barrel draw from crude stocks.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has shifted to the upside with the confirmation of Monday’s closing price reversal bottom.

A trade through $74.76 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a move through $83.30.

The minor trend is also down. A trade through $79.33 will change the minor trend to up. This will confirm the shift in momentum.

The market is currently trading on the strong side of a pivot at $78.09, making it support. Additional support is a pair of 50% levels at $76.22 and $75.25.

The short-term range is $83.83 to $74.76. Its 50% level at $79.29 is the next upside target.

Daily Swing Chart Technical Forecast

The direction of the January WTI crude oil market into the close on Tuesday will likely be determined by trader reaction to $78.09.

Bullish Scenario

A sustained move over $78.09 will indicate the presence of buyers. This could trigger a surge into $79.29 – $79.33.

Sellers could come in on the first test of $79.29 – $79.33. Taking out $79.33, however, could trigger an acceleration to the upside with $80.68 the next target. Overcoming this level could extend the rally into $83.30 to $83.83.

Bearish Scenario

A sustained move under $78.09 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly lead to a retest of $76.22 – $75.25.