Crude Oil Price Update – Weaker on Increased U.S. Rig Count; $44.32 Trigger Point for Rally

August West Texas Intermediate crude oil futures are under pressure again shortly before the regular session opening. Traders could be responding to the news from Friday that U.S. energy firms added seven oil drilling rigs last week. This marked the 24^th week of increases out of the last 25. The total rig count is now up to 763, the highest level since April 2015.

The rig count increase suggests U.S. oil production should continue to rise. Last week, the U.S. Energy Information Administration reported that oil production has risen over 10 percent since mid-2016 to 9.34 million barrels per day.

In other news released a short while ago, Saudi Aramco CEO Amin Nasser warned the long-term outlook for oil supplies is becoming increasingly worrying. He warned that a supply-gap could emerge due to a lack of investment.

The CEO of Saudi Aramco warned that the world may be heading for an oil shortage. Nasser said the long-term outlook for oil supplies is becoming increasingly worrying and that about $1 trillion in investments have already been lost since oil prices declined in 2014.

According to Nasser, “Financial investors are shying away from making much needed large investments in oil exploration, long-term development and the related infrastructure. Investments in smaller increments such as shale oil will just not cut it.”

Crude prices fell after his comments.

Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the $47.32 main top on July 5.

The main range is $42.05 to $47.32. Its retracement zone is $44.69 to $44.06. This zone is controlling the near-term direction of the market. Crude oil is trading under this zone today, helping to give it a downside bias.

Forecast

Based on the current price at $43.78, the nearest resistance is $44.06 and a downtrending angle at $44.32. A sustained move under these levels will indicate the selling is getting stronger.

The first downside target is an uptrending angle at $43.55. We could see a technical bounce on the first test of this level, but if it fails then look for an acceleration to the downside with the next target angle coming in at $42.80. This is the last potential support angle before the $42.05 main bottom.

The only chance for a rally today is a breakout over $44.32.