WTI crude oil appears to be forming a new descending channel with its lower highs and lower lows on the 1-hour chart. Price is testing support and might be due for a pullback to the top.
The 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, the climb is more likely to gain traction than to reverse. Then again, the gap between the moving averages is narrowing to reflect weakening bullish momentum and a potential bearish crossover.
RSI is heading up to show that bullish pressure is returning and that support is likely to hold. Stochastic is also turning higher to reflect a return in bullish momentum, and is also showing a slight bullish divergence with its lower lows. In that case, WTI crude oil could recover to the channel top at $64.40 per barrel or the mid-channel area of interest at $64 per barrel.
Crude oil edged lower on rig count data as Baker Hughes on Friday showed that the US rig count had inched up by two for the week ended April 10, bringing the total to 835. Analysts had expected a drop of 10 in rig counts, which would further ease oversupply concerns.
Still, the OPEC is likely to remain committed to its output deal and this could keep global glut worries in check. Hedge funds are also raising bullish bets on crude oil according to CFTC positioning data. The speculator group raised its combined futures and options position in New York and London by 30,726 contracts to 281,713 during the period, marking its seventh consecutive increase.
Nonetheless, analysts also warned that the rising prices could impact overall demand as business might pare purchases to save costs. The IMF downgrade on global growth forecasts could also keep a lid on business optimism.