Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
After a notable multi-day winning streak, WTI crude oil futures (NYMEX: CL) are experiencing a momentary dip, with the price action declining over 0.6% to $87.03/BLL during the Thursday session. This pause comes as traders eagerly await U.S. inventory data from the Department of Energy later today, which will provide insights into crude oil demand.
A private sector reading revealed a 5.5 million barrel drawdown in U.S. stocks for the week, though this was less substantial than the prior week. In addition to this data, traders are closely monitoring Chinese trade figures. While these figures showed both imports and exports declining in August, the drops were less severe than expected.
This mixed picture reflects ongoing uncertainty in the market. Concerns over energy demand are surfacing due to slowing global economic growth, while the effects of extended supply cuts by OPEC+ leaders Saudi Arabia and Russia are still being felt.
Technical
In the 4-hour chart, oil futures trade at $87.02/BBL, bearishly positioned below the daily pivot point but well-supported above the 50-EMA, 100-EMA, and 200-EMA. The 50-EMA maintains its bullish advantage over the 100-EMA and 200-EMA, although a declining RSI (62.47) and RSI-based MA (69.30) hint at weakening bullish momentum.
Short-term trading opportunities could materialize if the price breaks below the daily pivot point, targeting the 23.60% Fibonacci retracement level at $86.05/BBL. A decisive breach with significant volume might extend the downward move to $82.70/BBL and $79.32/BBL.
Alternatively, sustaining an upward push above the daily pivot point could offer short-term trades towards the $88.12/BBL resistance level, potentially paving the way for a challenge of the $90.30/BBL resistance.
Summary
The outlook for WTI crude oil prices is mixed in the short term. Prices could fall further if demand concerns continue to outweigh supply concerns, with the $86.05/BLL and $82.70/BLL support levels likely acting as levels of interest.
However, prices could also rise if U.S. crude oil inventories fall more than expected, with the $88.12/BLL likely the first target to fall as the price pushes for the $90.30/BLL resistance level.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
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