WTI crude oil has formed lower highs and lower lows inside a falling channel, and price is currently testing the resistance. If this holds, the commodity price could resume the drop to the Fibonacci extension levels next.
The 38.2% level is at $77.45 per barrel, then the 50% level is at $75.73 per barrel. Stronger selling pressure could take crude oil down to the 61.8% extension at $74 per barrel or the 76.4% level at $71.87 per barrel near the channel support. The full extension is at $68.42 per barrel.
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. The 100 SMA even lines up with the channel top around $83 per barrel to add to its strength as a ceiling.
Stochastic is already indicating overbought conditions and looks ready to turn lower, reflecting a return in bearish pressure. RSI has some room to climb before reaching the overbought area, though.
Sustained gains past the channel resistance and 200 SMA dynamic inflection point might be enough to confirm that a reversal from the downtrend is taking place.
Earlier in the week, the EIA reported a surprise draw of 0.2 million barrels in stockpiles versus the estimated increase of 2.0 million barrels. This suggests that demand remains elevated or that production is struggling to keep up.
Investors are on the lookout for signs of an energy crunch now that Russia is once again stoking geopolitical tensions. Recall that Putin announced a partial mobilization of their military just right before the Nord Stream pipeline underwent explosions under dubious circumstances.
Still, fears of a recession might be enough to keep risk-taking and crude oil price gains in check. Traders could be pricing in lower demand for fuel and energy commodities down the line, as businesses and consumers feel the brunt of rate hikes.