WTI Crude Oil Price Analysis for Aug. 12, 2020

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WTI crude oil continues to trend higher inside a rising channel on the 4-hour chart as it bounces off support at the middle. Applying the Fibonacci extension tool on this pullback move shows the next potential upside targets.

Price hit resistance at the 38.2% Fib extension and retreated back to the mid-channel area of interest, which still seems to be keeping losses in check. A continuation of the climb could take crude oil up to the 50% extension that lines up with the swing high at $43.44 per barrel or the 61.8% level that coincides with the channel resistance.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that the climb is more likely to gain traction than to reverse. The 100 SMA also appears to be holding as dynamic support, and a larger dip could still find some buyers at the 200 SMA dynamic inflection point.

RSI is turning higher without indicating oversold conditions, suggesting that bulls are eager to charge. Stochastic is still on the move down, though, so there is some selling pressure in play until oversold levels are reached.

Crude oil enjoyed some upside on reports that Iraq is gearing up to trim production in order to make up for its failure to comply with OPEC output restrictions earlier on. Note, however, that the cartel plans on loosening these supply curbs now that prices have already stabilized.

The group also predicted that the world’s oil demand is expected to drop by 9.1 million barrels per day this year as the global economy is likely to shrink by 4% versus the earlier 3.7% contraction predicted.

In 2021, global oil demand is set to grow by 7.0 million bpd, with the expected rise unchanged from last month’s projection.

“The forecast assumes that COVID-19 will largely be contained globally, with no further major disruptions to the global economy,” OPEC noted in its report.

“Large uncertainties prevail, possibly resulting in a negative impact on petroleum consumption going forward. During exceptional times the normal relationship between disposable income and oil demand does not hold up.”

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