WTI crude oil has formed higher lows and found resistance at the $54.60 per barrel mark to create an ascending triangle pattern on its 1-hour chart. Price looks ready to test support around $53.50 per barrel next.
However, the 100 SMA seems to be holding as dynamic support and might be enough to keep losses in check. The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside. In other words, support is more likely to hold than to break.
Stochastic is also turning higher after recently dipping to the oversold region, suggesting that buying pressure is picking up. RSI is also on the move up, so price might follow suit while buyers return. If bullish momentum is strong enough, a break past the triangle top could follow, leading to a rally of the same height as the formation.
Crude oil took another hit early in the week as risk appetite dipped on resurfacing geopolitical risks. In addition, Russia reported over the weekend that it did not meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter.
Apart from that, a pickup in supply is eyed as OPEC members Kuwait and Saudi Arabia talked to restart oil production from joint fields in the Neutral Zone between the two countries, bringing around 500K additional barrels to the world market.
Meanwhile, slowing growth in China kept traders wary of weaker global demand, which could worsen if the country decides to implement more trade measures targeting US products. China’s economic growth slowed to 6% year-on-year in the third quarter, its weakest in 27-1/2 years.