WTI crude oil is trending lower on its short-term charts, as traders expect a buildup in global supply from August to December. However, the longer-term uptrend remains intact.
As shown on the chart below, the commodity price formed lower highs since July but is still safely above the rising trend line that’s been holding since April. Another test of this rising support zone could be in the works, as it lines up with the $70 per barrel major psychological mark and 100 SMA.
On the subject of moving averages, the 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside. In other words, support levels are more likely to hold than to break.
Stochastic is still turning lower to show that bears have the upper hand, possibly taking crude oil all the way back down to the trend line.
The inventory reports from the EIA and API would likely impact crude oil action throughout the week. The American Petroleum Institute just reported that stocks fell by 879,000 barrels for the week ended July 30 while the Energy Information Administration is expecting a draw of 3.2 million barrels.
An even larger decline could mean more upside for the commodity while a smaller reduction could lead to more losses. Keep in mind that some businesses may have pared purchases on concerns about the Delta variant spread and possible lockdown restrictions.
Risk appetite resulting from this week’s key events would likely push crude oil around as well. Traders are eyeing a slightly faster pace of hiring growth for the NFP release, and the upcoming ADP report and ISM services PMI might have some clues.
Stronger than expected results could revive taper talks and lead traders to predict that the Fed could unwind stimulus soon, which might be bearish for crude oil.