WTI Crude: Bulls Hold Above 107.5 Despite Bearish Pressure

Crude prices have been pushing lower recently with the likelihood of a Syrian war falling lower. However, it seems that bearish momentum has stalled slightly with bulls putting up strong resistance. This was especially apparent yesterday when the Department of Energy’s weekly inventory data came out on the bearish side.

Crude Inventory fell by 219K barrels for the week of 6th September, way lower than the expected 2.1 million fall. This reflects a lower implied demand in Crude, sending price lower quickly after the numbers were released. Besides crude, other energy products were doing badly as well.

Distillate inventory grew by 2.6 million vs an expected 0.6 million, while Gasoline inventories gained 1.7 million when analysts predicted a fall of 1 million. With demand for refined products falling, future demand for crude oil becomes even bleaker. However, the price of WTI was resilient. After pushing to a low of 107.14, prices recovered quickly, ending the hour above 107.5 – the ceiling of yesterday’s consolidation.

Hourly Chart

The strength of bulls suggest that 107.5 may have a higher likelihood of holding, with 108.0 the immediate bullish target should prices indeed rebound from the support level. Stochastic readings agree with such an outlook with the Stoch curve tagging the Oversold region, lending strength to 107.50. However, there isn’t really any fundamental reason why Crude Oil should be trading higher right now, and hence it is equally likely--if not more--that 108.0 will hold out, keeping the overall bearish momentum intact.

Weekly Chart

The Weekly Chart shows prices staying precariously below the 108.5 consolidation ceiling. If bears manage to close below the 108.5 mark this week and this is followed up by further selling on Monday, the chances of a bearish move toward 103.0 increases.

The opposite is true for bulls if we close above 108.5, with 115.0 as the 1st bullish target in the near term. However, Stochastics favor a bearish move with readings currently pointing lower after staying in the Overbought region ever since we’ve breached the 100.0 price level. If the bearish signal does take flight, with price breaking 103.0, the likelihood of price heading all the way toward the 90+ region increases. This aligns with the overall fundamental outlook which suggest lower global demand for oil.

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