WTI crude oil might be in for a reversal from its downtrend as price is testing the top of the descending channel and appears to be breaking higher. Technical indicators still suggest a continuation of the slide.

The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. Price is breaking above the 100 SMA as an early indication of bullish pressure, though.

A break past the 200 SMA dynamic resistance around $70 per barrel could be enough to confirm that an uptrend is in the works. However, stochastic is turning lower from the overbought zone, indicating that sellers are taking over while exhausted buyers take a break.

RSI has a bit more room to climb before indicating overbought conditions, but the oscillator is also closing in on this level.

Crude oil got a strong boost from a larger than expected reduction in stockpiles of 3 million barrels versus the estimated drop of 1.9 million barrels. This suggests that demand remains strongly supported, despite concerns about the Delta variant and resulting lockdowns.

This is also positive news for the commodity, as many had been expecting a global glut to be in play after the OPEC agreed to increase production by 400K barrels per day from August to December this year.

The next main catalyst for crude oil might be Fed head Powell’s speech in Jackson Hole, as he is expected to clarify the timeline of the central bank’s taper plans. Confirming that they are likely to reduce stimulus by the end of the year could mean downside for business and consumer activity, which would then weigh on demand for fuel and energy commodities like crude oil.