Crude Oil Price Update – WTI Divergence with Brent Indicates Weakness

U.S. West Texas Intermediate crude oil futures are trading lower, reversing earlier gains and putting the market in a position to post a potentially bearish closing price reversal top. The earlier strength was fueled by the OPEC-led production cuts and the U.S. sanctions against Venezuela, which continued to tighten supply. Helping to put a lid on the rally were concerns over rising U.S. production. However, today’s reversal to the downside is likely being fueled by stock market volatility and weakness.

At 09:21 GMT, April WTI crude oil is trading $54.74, down $0.05 or -0.09%.

Crude oil has been moving lock-step with the stock market since they both bottomed around Christmas. Any substantial weakness in the stock market will likely encourage crude oil investors to book profits. WTI has also diverged from Brent crude oil so it is the weaker of the two futures contracts.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum could shift to the downside if a closing price reversal top is formed. A trade through $56.05 will signal a resumption of the uptrend. The main trend will change to down on a move through $51.62.

The minor trend is also up. A move through $53.51 will change the minor trend to down. This will also shift momentum to the downside.

The main range is $56.05 to $51.62. Its retracement zone is $54.36 to $53.84. This zone is controlling the near-term direction of the market.

Daily Technical Forecast

Based on the early price action, the direction of the April crude oil futures contract on Friday is likely to be determined by trader reaction to the downtrending Gann angle at $54.93.

Bullish Scenario

Overcoming and sustaining a rally over $54.93 will indicate the presence of buyers. If this move can create enough upside momentum then look for a rally into the next downtrending Gann angle at $55.49. The next target angle comes in at $55.77. This is the last potential resistance angle before the $56.05 main top.

Bearish Scenario

A sustained move under $54.93 will signal the presence of sellers. The daily chart shows there is room to the downside with the Fibonacci level at $54.36 the next target. This is another trigger point for an acceleration into a support cluster at $53.84, $53.80 and $53.62. Since the main trend is up, buyers could show up on a test of this area.