The momentum of WTI futures (NYMEX: CL) is facing a critical juncture, having enjoyed a positive trend with six days of gains in the last seven. The recent EIA inventory report has raised alarms about the demand landscape, casting a shadow on the previously buoyant market. While earlier support stemmed from anxieties surrounding global trade disturbances linked to Middle East tensions—underscored by attacks on ships in the Red Sea leading to concerns of significant supply disruptions—recent developments tell a different story. Major maritime carriers are now steering clear of the troubled route, resulting in elevated transport and insurance costs due to longer voyages.
Surprisingly, the oil market has not borne the brunt of these challenges as much as anticipated. Instead, the focal point has shifted, with current concerns about demand outweighing the earlier apprehensions about supply disruptions. The EIA’s revelation of a 2.909 million barrel surge in crude oil inventories, missing the anticipated -2.283 million consensus, sends a clear signal of a potential deceleration in demand. As the year approaches its conclusion, these demand-related worries could pose challenges to the trajectory of oil prices in the final week.
Technical
On the 4H chart, the futures trade at the dynamic support of a rising wedge, potentially at risk of a bearish breakdown. However, with the 25-SMA (green line) crossing above the 100-SMA (orange line) in recent sessions, the week’s momentum has tilted in the buyers’ favour. As we advance, there could be a tug-of-war between buyers and sellers, which could determine whether the rising wedge breakdown will play out.
If the futures move below the dynamic wedge support, the Fibonacci midpoint at $73.65 per barrel (BLL) could be the first level of support. A pivot could occur at this level to retest the breakdown, but if the momentum shifts the futures below, it could cross the 25-SMA and 100-SMA toward lower support at $72.60/BLL. The 50-SMA could then become a level to watch at $71.89/BLL as it could hold buyers to prevent a longer-term downtrend.
Conversely, if the futures remain within the wedge above the dynamic support, the 61.8% Fibonacci golden ratio at $75.05/BLL could be the first hurdle to cross. If that resistance holds, the wedge breakdown could remain in play. However, if the buyers move the futures above this critical resistance, higher resistance at $75.37/BLL and $76.21/BLL could soon come into play.
Summary
After the recent inventory report, the WTI futures are at risk of losing the strong bullish momentum it has maintained in the recent sessions. A rising wedge is in play, with the futures trading close to the dynamic support, which could be a pivotal level to watch in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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