Crude Oil Price Update – Way of Least Resistance is Up; Support Cluster $44.69 to $44.06

August West Texas Intermediate crude oil futures are trading higher shortly after the regular session opening and a little less than three hours before the U.S. Energy Information Administration (EIA) inventories report at 1500 GMT. The report is expected to show a draw of about 2.4 million barrels.

Helping to boost the market today is a bigger than expected inventories draw as reported by the American Petroleum Institute. The API report showed inventories fell by 5.764 million barrels the week-ended June 30. Analysts were looking for a read of 2.83 million barrels.

Crude could rally if the EIA headline number comes in over 2.4 million barrels or if gasoline inventories show a larger-than-expected draw.

Traders will also be watching the daily U.S. production number to see if last week’s 100,000 barrel drop was a fluke or the start of a trend.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside on Wednesday with the formation of the closing price reversal top. A trade through $44.51 will confirm the chart pattern. A move through $47.32 will negate the chart pattern and signal a resumption of the uptrend.

The main range is $52.22 to $42.05. Its retracement zone at $47.14 to $48.34 is the primary upside target. This zone stopped the rally on Wednesday at $47.32.

The short-term range is $42.05 to $47.32. Its retracement zone at $44.69 to $44.06 is the primary downside target. This zone stopped the selling on Wednesday at $44.51.

The short-term zone is very important because buyers are going to come in on a test of the area in an effort to form a potentially bullish secondary higher bottom. Sellers are going to try to take out this zone in an effort to make $47.32 a new main top.

Forecast

Based on the current price at $45.89 and the earlier price action, the direction of the market today is likely to be determined by trader reaction to the downtrending angle at $45.22.

A sustained move over $45.22 will indicate the presence of buyers. This could generate enough upside momentum to challenge the resistance cluster at $47.05 to $47.14. We could see sellers come in on a test of this area. This is also a trigger point for an acceleration into $47.32 then $48.34 and $48.72.

A sustained move under $45.22 will signal the presence of sellers. This is followed by a series of levels at $44.69, $44.55 and $44.06. Taking out $44.06 could drive the market into an uptrending angle at $43.30. This is the last potential support angle before the $42.05 main bottom.

The chart shows the least resistance is up. Any sell-off is likely to be labored.