WTI crude oil is trending lower on its hourly chart, forming lower highs and lower lows inside a falling channel. Price is currently testing the resistance and could be due for a continuation of the slide.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the downtrend is more likely to resume than to reverse. The gap between the indicators is widening to reflect strengthening selling pressure, and the 100 SMA lines up with the channel top to add to its strength as a ceiling.
RSI is edging higher to show that there is some bullish pressure left, but the oscillator is also approaching the overbought zone to reflect exhaustion among buyers. Stochastic is already indicating overbought conditions, so turning lower would mean that sellers are taking over.
The EIA printed a smaller than expected draw of 0.9 million barrels in crude oil stockpiles versus the estimated reduction of 1.5 million barrels. This suggests that demand has slowed in the reporting week or that supply picked up.
Note that the US released oil reserves into the global market over the past week in an effort to keep a lid on price pressures. However, the emergence of the Omicron variant spurred expectations of weaker demand down the line.
Several countries are already reintroducing travel restrictions in order to curb the spread of the virus, likely limiting purchases of fuel and energy commodities again. Further updates on this could determine where the commodity price is headed next.
Signs of effectiveness among the vaccines could bring risk-taking back, as this would convince investors that another round of lockdowns is not necessary. On the other hand, any resistance for the variant could prompt another wave of risk-off flows.