WTI crude oil fell through the short-term rising channel to signal that that a longer-term decline is gaining traction. Price couldn’t bust through the resistance at the $64 per barrel and is now setting its sights on the downside targets marked by the Fibonacci extension tool.
Price has tumbled below the 38.2% extension and might be aiming for the 50% level at $60.50 per barrel next. Stronger selling pressure could take it down to the 61.8% level at $60 per barrel or the 78.6% extension at $58.71 per barrel. The full extension is located at $57.29 per barrel.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside or that the selloff is more likely to gain momentum from here. Then again, the gap between the moving averages might be narrowing to reflect weaker selling pressure.
RSI is already in the oversold region to indicate that sellers are exhausted and that buyers could take over. Stochastic is also in the oversold region to show that bullish pressure might return once the oscillator turns back up.
Crude oil took hits on another build in US stockpiles as reported by the Energy Information Administration. The EIA revealed that inventories rose by 4.7 million barrels in the week ended May 17 to 476.8 million barrels, their highest since July 2017.
This suggests weaker demand amid sustained production, something that could keep going as businesses pare energy purchases with their more cautious outlook. After all, trade tensions have been heightened in the past weeks on account of more tariffs threats from the US to China.
Many predict that retaliatory measures could be in the works for June if talks break down, extending the global economic slump and worsening the crude oil glut. Still, keep in mind that Middle East tensions and the OPEC output deal could keep supply levels in check.