WTI crude – Is stalling a bearish signal?

Oil finding resistance after inventory data

Oil is trading marginally lower so far today, with a stronger dollar potentially being a drag on WTI crude. Yesterday’s inventory report from EIA may also have taken some of edge off the rally, with the drawdown having been lower than that reported by API a day earlier. Oil is in an interesting place though because on the one hand it recently broke through notable technical resistance but on the other it did so as momentum lagged.

Reports of a tighter oil market even as the US pumps at record rates will be encouraging to OPEC+ given the efforts made this year to rebalance, although it will cast significant doubt over Russia’s participation in any extension to the end of the year, with current cuts set to expire in June.

WTI Daily Chart

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From a technical perspective, we’ve been range-bound for the last 10 days or so, between $63 and $64.50. It’s not yet clear which direction the breakout will come but should it be to the downside, it could trigger an interesting correction in oil.

WTI Crude 4-Hour Chart

Given the size of what is currently looking like a triple top, we get a possible price projection of $61.50. While this is clearly not a guarantee or a limit, it is interesting that this would take us back to the previous consolidation zone, which lies within the 200 and 233-day simple moving average band that we broke above earlier on in April. A rotation off here would represent confirmation of the break and be a potentially bullish signal.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.