WTI crude oil is still safely inside its ascending channel pattern on the 4-hour time frame but seems to be hesitating on its bounce, which means that the pullback is still in play. Price has bounced off the 50% Fib at $49.29 per barrel but might still correct to the 61.8% Fib closer to the channel support at $48.45 per barrel.
If these Fib levels continue to keep losses in check, WTI crude oil could head back to the swing high at $52.83 per barrel or onto the channel resistance at $53 per barrel. Stochastic is pointing down and has plenty of room to fall so the commodity could follow suit and even break below the channel support.
However, the 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. This means that the rally is more likely to continue than to reverse. Also the 200 SMA appears to have held as dynamic support on the latest test and might continue to do so.
RSI is also pointing down to indicate that bears are regaining the upper hand even though the oscillator hasn’t quite indicated overbought conditions just yet.
Traders are waiting on the OPEC to confirm an extension of their output deal past the March 2018 end date in an effort to maintain price stability. This could buoy crude oil prices higher, especially since global demand is expected to pick up next year.
“U.S. sanctions could cut off a lot of Iranian oil trade finance. Last time we saw this, it cut off 1 million bpd of supplies. I don’t think it’d be that big this time round, but it would still be significant,” said Jeff Brown, president of consultancy Facts Global Energy (FGE), remarked at the Reuters Global Commodities Summit.
However, Brown also warned against a return to $100 per barrel oil prices, suggesting that it may top out below $60 to $70.