Crude Oil Price Update – Worries Over Demand Dominating Supply Concerns

U.S. West Texas Intermediate crude oil futures are trading lower on Monday after giving up earlier gains. Prices were supported overnight on the back of improving China export data and Friday’s robust jobs report, but those positive developments were offset by lingering worries over demand. Even a weaker U.S. Dollar couldn’t drum up enough buying to hold on to the early rise in prices.

At 12:02 GMT, September WTI crude oil futures are trading $88.22, down $0.79 or -0.89%. On Friday, the United States Oil Fund ETF (USO) settled at $71.53, unchanged.

Although the data from China and the U.S. is potentially supportive, it wasn’t enough to overcome the fact that demand worries have overtaken supply fears as the number one concern for traders.

The elimination of the “War Premium” is the best affirmation that demand worries are the key driver of the price action at this time. These concerns are going to be hard to shake unless the API and EIA inventories data shows a considerable drawdown this week.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $101.88 will change the main trend to up.

Momentum is also trending lower. A trade through Friday’s high at $90.76 will confirm the closing price reversal bottom, shifting momentum to the upside. A move through $87.01 will negate the chart pattern and signal a resumption of the downtrend.

The long-term range is $60.99 to $118.08. The market is currently testing its retracement zone at $89.54 to $82.80. This zone is controlling the long-term direction of the market.

The minor range is $101.88 to $87.01. If the closing price reversal bottom is confirmed then look for a near-term rally into its pivot at $94.45.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at $89.54 will determine the direction of the September WTI crude oil futures contract into the close on Monday.

Bearish Scenario

A sustained move under $89.54 will indicate the presence of sellers. The first downside target is the closing price reversal bottom at $87.01. If this move generates enough downside momentum then look for the selling to possibly extend into the long-term Fibonacci level at $82.80.

Bullish Scenario

A sustained move over $89.54 will signal the presence of buyers. Overtaking $90.76 will confirm the closing price reversal bottom. This could trigger an acceleration into the minor pivot at $94.45.