WTI crude oil finally made a convincing break below the ascending channel on its daily time frame, signaling a long-term selloff might be due. In addition, price also appears to be forming a large head and shoulders pattern with the neckline around $48/barrel as well.

This follows through from the downside break of the short-term triangle consolidation pattern around the channel support last week. Note, however, that the 100 SMA is still above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. Also, the gap between the moving averages is widening to indicate strengthening bullish pressure.

With that, price still has a chance at recovering back inside the channel to prove that the breakdown was a fakeout. Stochastic is indicating oversold conditions, which means that selling pressure is fading and that buyers could regain control of price action. RSI still has a bit of room to head lower and WTI crude oil could follow suit.

If buying pressure returns, the commodity could make it back to the middle of the channel around $53/barrel or at least until the area of interest at the $50/barrel psychological level. This depends on how OPEC ministers behave during the upcoming summit later this month and what they decide on when it comes to extending the output deal.

Selling pressure picked up this week as Libya’s rebel governments agreed to remove militia and pursue discussions for peace in the country. This eliminates the risk that oil fields and ports would undergo disruptions in operations due to force majeure or other attacks.

Meanwhile, Saudi Arabia’s deputy crown prince mentioned that $45/barrel Brent crude oil would still fit in their budget scenarios, leading many to think that the OPEC nation won’t need to pursue further cuts to production.

Earlier in the day, the American Petroleum Institute reported a decline of 4.2 million barrels in stockpiles, larger than the expected draw of 2.2 million barrels and enough to ease oversupply concerns once more. The Energy Information Administration is set to report its inventory levels today and a similar result could revive upside pressure for crude oil.