WTI crude oil recently bounced off the longer-term channel resistance and is on its way to test support. Price is also trading inside a smaller descending channel and may be due for a quick correction before heading further down.
Price is currently testing support and may pop back up to the resistance around $73 per barrel. This lines up with the dynamic inflection points at the moving averages.
On the topic of moving averages, the 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse.
RSI is still pointing up, however, so there may be some bullish pressure left. Stochastic is also heading north so crude oil could follow suit, but this oscillator is approaching overbought levels to reflect exhaustion. Turning lower could bring sellers back in and lead to a move to the larger channel bottom at $67 per barrel.
The pickup in Libya’s oil production is currently being blamed for the recent price tumble as it offset OPEC supply concerns earlier on. The country’s National Oil Corp (NOC) will reopen four export terminals that had been closed for a couple of weeks, bringing 850,000 barrels per day in additional output.
Meanwhile, the IEA reported that there is potentially a spare capacity crunch, citing:
“Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit. This vulnerability currently underpins oil prices and seems likely to continue doing so.”
Crude oil has so far shrugged of the larger than expected draw in US stockpiles as reported by the EIA and Trump’s remarks on pursuing a fair trade deal with China.