The daily chart for the WTI September contract makes interesting reading as we head into the summer doldrums. For the time being, we look set for a further extended congestion phase to develop with the VPOC, the yellow dashed line firmly anchored at $72 per barrel, a level likely to remain in focus for the next few weeks.
To date, the price action in August has followed a similar pattern to that of July, which saw the price of oil fall to just below $66 per barrel before recovering and return to the $74 per barrel area by the end of the month. As August got under way, this pattern of price action was repeated. Note the well-developed price-based support at $65 per barrel and $66 per barrel denoted by the red and blue dashed lines of the accumulation and distribution indicator. On both occasions, this provided the requisite platform for a bounce higher.
In the recent move lower of Aug. 9, note the depth of the wick to the lower body of the candle, which was accompanied with good volume confirming buyers stepping back in at this point. This facet of buying support was further confirmed two days later with the strong recovery intraday on Aug. 11, with a deep lower wick. Once again it accompanied with good volume. Given these signals, the price of oil is likely to continue higher and back to the VPOC in due course, where we can expect further congestion to follow.
In terms of the weekly oil inventories, while these fell well short of the forecast of -0.8m bbls draw, instead of coming in at 0.4m bbls draw, helped to give the price of oil a little boost in the right direction.