WTI crude oil broke above the neckline of its inverted head and shoulders pattern on the 1-hour chart, signaling that a reversal from the short-term downtrend is in order.

Price could be in for a climb that’s the same size as the chart pattern, which spans $66 per barrel to around $68 per barrel. However, technical indicators are still suggesting that the selloff could resume.

The 100 SMA is below the 200 SMA to show that the path of least resistance is to the downside. The 200 SMA is currently holding as dynamic resistance as well, possibly sending crude oil back down to the lows near $66 per barrel.

Stochastic is in the overbought zone to reflect exhaustion among buyers, so turning lower would mean that selling pressure is returning. RSI is almost in the overbought zone and appears to be topping out as well.

Crude oil could still enjoy some upside pressure even after the EIA reported a smaller draw of 0.4 million barrels versus the estimated drop of 0.8 million barrels. After all, this comes after a build of 3.6 million barrels, so the reduction reflects stronger demand.

The OPEC agreement to increase production by 400K barrels per day could still keep global glut concerns in play, especially since demand is likely to dwindle while more countries impose lockdown measures to curb the spread of the Delta variant.

The technical committee is meeting this week, possibly to discuss potential adjustments to the output deal. However, the lack of any recommendation to curb production could mean more downside for the commodity price in the coming weeks or even months.

Risk sentiment might still be enough to prop the commodity higher, though, as the weak US CPI could ensure that the Fed would keep stimulus in place for much longer.