WTI crude oil is still in correction mode, as price tests the 50% Fibonacci retracement level. A larger pullback might reach the 61.8% Fib or the falling trend line connecting the highs since early this month.
The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. The gap between the indicators is widening to reflect strengthening bearish momentum.
The 200 SMA coincides with the 61.8% Fib at the $71.45 per barrel mark to add to its strength as a ceiling. The falling trend line is closer to $73 per barrel and might be the line in the sand for a pullback.
Stochastic is already indicating overbought conditions to reflect exhaustion among buyers, so turning lower would confirm that sellers are taking over. If that happens, crude oil could resume the slide to the swing low at $65 per barrel or lower.
The OPEC+ decision to increase their output by 400K barrels per day in August is keeping downside pressure in play for crude oil, but the pickup in demand might be enough to keep the commodity afloat.
The EIA, however, reported a surprise build of 2.1 million barrels in stockpiles versus the estimated draw of 4.6 million barrels and the earlier reduction of 7.9 million barrels. This suggests that demand has been much weaker than expected or that output is increasing.
Risk-off flows stemming from market concerns about the Delta variant spread are also weighing on higher-yielding assets like commodities these days. Some say that the bounce over the past few sessions was merely due to profit-taking and that fundamentals support further declines.
On a longer-term time frame the crucial level for crude oil to test is $72 per barrel since this lines up with a broken long-term uptrend line that might hold as resistance.