The oil market was dominated by the bullish sentiment for a long period. The futures for the WTI crude oil increased by more than 14% over the last month. A technical correction usually happens after such strong movements.
The last report from the U.S. Energy Information Administration was ambiguous. Here are its details:
+2.237 mln barrels of oil inventories. Market experts were expecting the fall of this indicator by 2.876 million barrels;
-3.312 mln barrels of gasoline inventories;
-3.359 mln barrels of distillates stocks;
9.620 mln barrels per day in oil production (+67000 barrels per day);
The growth of oil inventories and production in the United States put pressure on the oil prices. A probable cause for it is a previous sharp drop of distillate and gasoline stocks, while oil inventories increased just for the 2nd time for the last seven weeks. The total drop of all energy resources reduced by 9.1 mln barrels per day.
The technical pattern on the oil market:
Support levels: 56.50 USD, 55.75 USD, 55.00 USD
Resistance levels: 57.50 USD, 59.00 USD
The futures for the WTI crude oil are moving in the flat at the moment. The technical pattern is ambiguous. The indicators don’t show us any accurate signals. The price has moved over 50 MA. The MACD histogram is near the 0 mark. Opening positions from the key levels is recommended.
A correction may appear, if the oil price fixes below the 56.50 support level. The target for fixing profit is the 55.75 level. The quotes can reach the 55.00 support level in the medium term.
An alternative trade idea. I also don’t rule out the further rising of the oil prices. Opening long positions may be reasonable in case the quotes fix above 57.50. They can move to 58.50-59.00.
It is also advisable to use a trailing stop for both deals.