Outlook for Crude continue to look bleak. Latest API data shows a larger than expected growth in inventory, signalling a weaker than expected implied demand. This is yet another setback for Crude which has been one of the most bearishly affected asset following the confirmation of US Government Shutdown, pushing Crude oil down once again at the end of the US session even though prices have rebounded post US midday. Considering that US stocks have been bullish for the past 2 days, the decline in Crude underlines the inherent bearishness surrounding the black gold right now. Today’s Department of Energy inventory data may reveal the soft demand further, potentially sending prices below 101.5 and usher in further bearish acceleration today.
From a technical perspective, further bearish acceleration make sense given that price is being squeezed between the descending Channel Top and the 102.0 flat support. However, that is only half the story. It is definitely possible that we could still see a short squeeze which can propel prices up towards 102.5 considering how prices have been more than adequately supported above 102.0. Stochastic readings support a mild bearish outlook with a peak formed just under the 50.0 level, but Stoch level has flattened significantly and similarly could rebound above the 35.0 mark similar to the recent trough just a few hours ago.
Long-term technical outlook is bearish, but prices are will need to close below 102.0 this week as further confirmation for the 103.0 breakout which will help to accelerate bearish movement towards a long term target of 85.0+ levels with 98.0 providing interim resistance. However, if the short-term short squeeze does happen and manage to send prices up above 103.0, the breakout will be invalidated and bias will be on the upside opening up 108.5 – 112.5 ceiling as bullish target.