WTI crude oil is consolidating inside a symmetrical triangle on its short-term chart, as price formed lower highs and higher lows on its 1-hour time frame. Price just bounced off support and is approaching resistance at $60 per barrel.
Technical indicators suggest that the top of the triangle is more likely to hold than to break. The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside, possibly taking crude oil back to the bottom near $58.50 per barrel. In addition, price is moving below both indicators, so these could hold as dynamic resistance.
Stochastic is already turning lower without reaching the overbought zone, suggesting that sellers are eager to return. RSI is moving sideways to reflect consolidation.
Sustained selling pressure could spur a break below the triangle bottom and a selloff that’s at least the same height as the formation, which spans $58 per barrel to around $61.50 per barrel.
Crude oil enjoyed some upside as the EIA reported a draw of 3.5 million barrels in stockpiles versus the estimated reduction of 2.0 million barrels and the earlier drop of 0.9 million barrels. This suggests that demand is much stronger than expected, even while supply levels are elevated.
Risk appetite might also be enough to spur gains for the commodity while markets remain focused on the vaccination programs and stimulus efforts. These could shore up business and consumer activity in the near-term, which would then ramp up purchases of fuel and energy commodities. Also, the reopening of several economies like the UK could also mean stronger oil demand.
However, keep in mind that the OPEC has agreed to gradually start increasing output soon, which could mean elevated global supply levels and a potential glut in case demand is unable to keep up.