WTI crude oil recently bounced off the top of its triangle pattern and looks poised for a test of support. This can also be seen as a descending triangle pattern, with support around $60.30 per barrel.
The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This suggests that the drop is more likely to continue from here. The moving averages appear to be holding as dynamic inflection points as well.
Stochastic is pulling up, though, so there may be some bullish momentum returning. RSI is also heading north so crude oil might follow suit. In this case, price could still test the triangle resistance at $61.50 per barrel.
Baker Hughes reported a fall in crude oil rig count for the previous week, leading to expectations of a lower build or even a reduction in stockpiles from the API and EIA data this week. However, continued gains in US output continue to keep oversupply concerns in play.
According to the IEA, US production is expected to rise above 11 million barrels per day by late 2018, taking the top spot from Russia. With that, an increase in API or EIA inventories could lead to another wave lower for crude oil, especially if demand is slated to stay subdued.
China is scheduled to release data on industrial production, retail sales, and fixed asset investment this week. These figures could provide some clues on how the world’s second largest economy and one of the top consumers of crude oil might see demand fare in the coming months.
Nonetheless, OPEC members have renewed their pledge to keep a lid on production until the end of the year. Still, traders are also on the lookout for signs that the deal might be reevaluated in June.