September West Texas Intermediate crude oil futures are trading slightly higher shortly before the cash market opening. The market is also trading inside yesterday’s range, suggesting investor indecision and impending volatility.
After a bullish U.S. Energy Information Administration inventories report sent the futures market to its highest level since June 7 early Thursday, sellers came in to drive the market lower, producing a potentially bearish closing price reversal top.
Fundamentally, U.S. inventories fell across the board including crude oil, gasoline and distillates, but U.S. production continued to rise. Position-squaring ahead of the July 24 meeting in St. Petersburg, Russia between OPEC and non-OPEC producers led to the sell-off on Thursday. This news could hold prices in a range today.
The main trend is up according to the daily swing chart. A trade through $47.74 will negate the closing price reversal top and signal a resumption of the uptrend. A trade through $46.81 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day correction with $45.79 to $45.32 the primary downside target.
The primary upside target is a major retracement zone at $47.33 to $48.52. This zone is being defended by short-sellers.
Based on the current price at $47.13 and the earlier price action, it looks as if the tone of the day will be determined by trader reaction to yesterday’s low at $46.81.
A sustained move over $46.81 will indicate the presence of buyers. This could lead to a test of the main 50% level at $47.33 and a long-term downtrending angle at $47.49. This is followed by the reversal top at $47.74.
The trigger point for a potential acceleration to the upside is $47.74. Taking out this level could generate the upside momentum needed to challenge the main Fibonacci level at $48.52.
A sustained move under $46.81 will confirm the closing price reversal top. This could trigger an acceleration into the short-term uptrending angle at $46.08. This is followed by the short-term retracement zone at $45.79 to $45.32.