The short term rally for Crude Oil came to a shuddering halt yesterday, as the December WTI futures contract closed at $92.88 per barrel, having shed over $3 per barrel on the day, closing as a wide spread down candle on the daily chart. The sharp sell-off was accompanied by high volume, validating the move lower as US dollar strength continues to dominate the commodity markets.
The deep resistance level in the $96 per barrel region also came firmly into play yesterday, with oil failing to breach this key level, denoted with the blue dotted line. This level of resistance has held firm throughout August, adding further downward pressure to the current bearish picture.
The pivot high posted on Monday’s candle is also signalling a deeper move lower, and the next level of possible support is in the $92.80 per barrel range. If oil breaks through this price point, then expect to see the commodity move deeper still, initially through $92 per barrel, with the next area of support on the longer term charts in place at $88 per barrel.
As always, volume price analysis will signal the way, and to date there has been no evidence of a buying climax for oil in any timeframe – so for the time being, the commodity remains bearish, if and until the big operators move back in to buy.
Because of the Labor day holiday, the crude oil inventories report is not due until tomorrow. With markets expecting a draw once again of -1.02m bbls, this may help to provide some support for the beleaguered commodity. However, unless this number is wildly exceeded, any bounce is likely to be modest given the strength of the move lower yesterday.