Crude Oil Price Update – Vulnerable to Heavy Hedge Fund Liquidation

Based on the early price action, the direction of the September WTI crude oil futures contract the rest of the session on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at $58.00.
James Hyerczyk
EIA Oil Report

U.S. West Texas Intermediate crude oil futures are trading marginally higher following the release of the U.S. Energy Information Administration’s (EIA) weekly inventories report. The market is also trading inside yesterday’s wide range, which indicates investor indecision and impending volatility.

At 14:30 GMT, the EIA report showed a 3.1 million barrel draw down. This was slightly above the 3.6 million barrel draw down estimate.

Prices plunged on Tuesday after U.S. government officials said Iran is open to talks over their nuclear missile program. The news encourage speculators who had bet on a supply disruption in the Middle East to aggressive liquidate their long positions.

At 14:36 GMT, September WTI crude oil futures are trading $58.12, up $0.38 or +0.66%.

Daily September WTI Crude Oil

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at $61.02 on July 11.

A trade through $61.02 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through $56.13.

The short-term range is $56.13 to $61.02. The market is currently testing its retracement zone at $58.58 to $58.00.

The market is also trading on the weak side of a long-term retracement zone at $58.41 to $60.18.

If the main trend changes to down then look for a break into the intermediate retracement zone at $55.62 to $54.50.

Daily Technical Forecast

Based on the early price action, the direction of the September WTI crude oil futures contract the rest of the session on Wednesday is likely to be determined by trader reaction to the short-term Fibonacci level at $58.00.

Bearish Scenario

A sustained move under $58.00 will indicate the presence of sellers. The next target is yesterday’s low at $57.19. Taking out this level could trigger an acceleration to the downside with the next target the main bottom at $56.13, followed by the intermediate 50% level at $55.62.

Bullish Scenario

A sustained move over $58.00 will signal the presence of buyers. The next upside targets are an uptrending Gann angle at $60.02, followed by the main 50% level at $58.41. This is a potential trigger point for an acceleration to the upside.

Overview

Everything is coming up bearish this week. No hurricane. An easing of tensions in the Middle East. Rising U.S. shale production. The market may be ripe for some heavy hedge fund liquidation.

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