Crude Oil Price Update – Two-Day Break to Set-Up Secondary Higher Bottom Would Be Constructive

U.S. West Texas Intermediate crude oil futures are trading lower at the mid-session after giving back earlier gains, despite growing optimism that major producers have moved closer to an agreement to enact deeper output cuts and a government report showing a smaller-than-expected build in weekly crude inventories. Uncertainty over the size of a drop in global demand is also influencing the price action as well as profit-taking and position-squaring ahead of the OPEC meeting on March 6 – 7.

At 17:24 GMT, April WTI crude oil is trading $46.88, down $0.30 or -0.62%.

The U.S. Energy Information Administration (EIA) revealed that U.S. crude supplies rose by 785,000 barrels for the week ended February 28. The government agency had reported increases in each of the last five weeks. Traders were looking for a rise of 3.5 million barrels.

The EIA data also showed supply declines of 4.3 million barrels for gasoline and 4 million barrels for distillates. Surveys called for gasoline supplies to decline by 2.8 million barrels and distillate supplies to drop by 2.4 million barrels.

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending higher. A trade through $54.66 will change the main trend to up, while a move through $43.32 will negate the closing price reversal bottom and signal a resumption of the downtrend.

On the downside, the support zone is $45.92 to $43.55. These are two former bottoms from 2018 and 2016 respectively.

The short-term range is $54.66 to $43.32. Its retracement zone at $48.99 to $50.33 is the primary upside target.

Daily Technical Forecast

Based on the early price action and the current price at $46.88, the direction of the April WTI crude oil futures contract the rest of the session on Wednesday is likely to be determined by trader reaction to the steep uptrending Gann angle at $49.32.

Bullish Scenario

A sustained move over $49.32 will indicate the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into the short-term 50% level at $48.99, followed by a downtrending Gann angle at $50.16 and a Fibonacci level at $50.33.

Bearish Scenario

A sustained move under $49.32 will signal the presence of sellers. This could trigger a pullback into the next uptrending Gann angle at $46.32.

Side Notes

I’d like to see a two-day pullback to set up a secondary higher bottom. The first leg up was short-covering. This should be followed by a 50% to 61.8% correction. If the market is going to move higher then buyers will come in on the pullback. This should form a secondary higher bottom.