WTI crude oil is trending lower on the short-term time frames and could be due for another drop soon. Price is in a descending channel on its 15-minute time frame and is currently testing resistance.
If this area holds as a ceiling, crude oil could fall back to support around $70 per barrel. However, the 100 SMA has crossed above the longer-term 200 SMA to signal that the path of least resistance is to the upside. In other words, resistance is more likely to hold than to break.
RSI is also pointing up to show that buyers are regaining the upper hand. Stochastic was on the move up but appears to be changing its mind halfway through, suggesting a return in selling pressure.
The commodity has drawn a lot of support from rising geopolitical tensions stemming from Trump’s decision to take the US out of the Iran deal. This could mean ramifications in the region and even in international relations as several allies remain committed to supporting the deal.
Expectations of output disruptions in Iran continue to keep global oversupply concerns in check, along with the surprise draws in stockpiles as reported by the API and EIA. Another set of reductions could mean a new leg higher for crude oil.
To top it off, easing tightening jitters are also supporting commodities these days as ECB officials have downplayed rate hike expectations while weak data from the US could dampen Fed tightening plans. Last week, the BOE and RBNZ decisions turned out less hawkish than expected.
Looking ahead, inventory data could still lead to sustained moves for crude oil but the situation in Iran might be the main driving factor. Cooling tensions could lead to profit-taking for the commodity, which might mean a much-needed correction from its rally.