WTI crude oil made a sharp break below its rising wedge consolidation support to signal that a selloff is underway. However, price found support at $66 per barrel and could be due for a correction before resuming the slide.
Applying the Fibonacci retracement tool on the latest swing high and low on the 4-hour time frame shows that the 618% level lines upw ith an area of interest around the $70 per barrel mark. The 50% level coincides with the dynamic inflection point at the 200 SMA.
The 100 SMA is still above the longer-term 200 SMA, though, so the path of least resistance is to the upside. This means that there’s still a possibility for the longer-term climb to resume. However, the gap between the moving averages is narrowing to signal weakening bullish momentum and a potential downward crossover.
Stochastic is already indicating oversold conditions, which suggests that profit-taking off these levels might be due. At the same time, RSI is also in oversold territory to signal that sellers are feeling exhausted and may let buyers take over. If any of the Fibs keep gains in check, another move to the swing low could be seen.
Russia’s energy minister said over the weekend that they could review output curbs put in place earlier on in order to adjust to supply restrictions from Venezuela and Iran. This comes after their meeting with Saudi Arabian counterparts and ahead of a key OPEC meeting in Vienna in June.
Recall that there have been concerns that the cartel could revise their output levels this coming month even though they pledged to extend their output arrangement until the end of this year. They did say that they could simply relax compliance but it’s understandable that crude oil bulls are seeing a top in price from here.