WTI fell sharply yesterday after Saudi Energy Minister said that his nation could increase its oil production in case the US sanctions on Iran disrupt supply, in order to “meet any demand that materializes”. The tumble may have been amplified by the American Petroleum Institute (API) weekly report, which showed that US crude stocks have risen by 9.9mn barrels.
From a technical standpoint, the slide brought the price below the long-term uptrend line taken from the low of the 21st of June 2017, as well as below the key support (now turned into resistance) territory of 67.20. In our view, this may have turned the near-term outlook to somewhat negative.
We believe that the break below 67.20 may have opened the path for our next support of 63.90, defined by the low of the 16th of August. The catalyst for another leg down could be an upside surprise in the Energy Information Administration weekly report, due out later today. Now, if the bears prove strong enough to maintain their momentum and push WTI below 63.90 in the near future, then we may see them targeting the low of the 6th of April, at around 61.80.
Looking at our daily oscillators, we see that the RSI slid and hit support near its 30 line, while the MACD lies below both its zero and trigger lines, pointing down. Both these indicators detect downside speed, but the fact that the RSI turned slightly up from near 30 make us cautious of a corrective bounce before the next negative leg.
That said, even if this is the case, as long as the price is trading below the aforementioned long-term uptrend line, we would still consider the near-term outlook to be cautiously negative. We would like to see a clear and decisive close above 70.30 before we start examining whether sellers have abandoned the battle. Something like that could confirm the return of the “black liquid” back above the uptrend line and may initially pave the way for our next resistance of 72.55. Another break above 72.55 could trigger extensions towards the psychological barrier of 75.00.
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