Crude Oil Update – Bullish Tone, but Gains Limited by Supply Concerns

April West Texas Intermediate Crude Oil futures are trading higher on Monday, but gains have been limited as investors assess whether another increase in the number of U.S. drilling rigs and record stockpiles might offset the rising compliance with OPEC’s plan to curtail output.

Today is a bank holiday in the U.S. so volume is expected to come in below average. Hedge funds and commodity funds are still long the market, however, money managers have been hesitant to buy strength given the rising U.S. stockpiles.

Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher with the formation of the new secondary higher bottom at $53.12.

A trade through $54.55 will change the main trend to up. Taking out $53.12 will turn the main trend to down.

The retracement zone support is $53.21 to $52.89.

The market is currently trading on the strong side of the short-term retracement zone at $54.01 to $53.84, making it a support zone today.

Forecast

Based on the current price at $54.03 and the earlier price action, the direction of the crude oil market today is likely to be determined by trader reaction to the downtrending angle at $54.18 and the short-term Fibonacci level at $54.01.

Taking out $54.18 will indicate the presence of buyers. This could trigger a further rally into a price cluster at $54.36 to $54.39. This is the last potential resistance area before the 54.55 main top.

Additional resistance is $54.59. This is the last downtrending angle before the $54.96 main top.

A sustained move under $54.01 could lead to a labored break with potential support coming in at $53.86 and $53.84. This is followed by an uptrending angle at $53.62. This is the trigger point for an acceleration into another uptrending angle at $53.37.