The December WTI contract for oil closed marginally higher yesterday, closing the oil trading session at $87.09 per barrel, as the commodity attempts to find some positive traction, following the sharp decline since late September and throughout October. Despite yesterday’s move higher, the outlook for oil remains firmly bearish on both the daily and the three day chart, but the question now is for how much longer. Much will also depend on the fortunes for the US dollar, with Non Farm Payroll and the US Presidential election, both playing their part, and with the USD index now breaking above a key technical level at 80.32 on the daily chart, this could be the key driver for oil prices over the next few weeks.
Starting with the daily chart, the volumes remain firmly bearish in red, with sustained selling of the commodity clearly evident for the last two weeks, and even yesterday’s modest rise failed to change the market’s view. The three day chart is identical, with consistent selling in this timeframe, suggesting that the longer term speculators are also net sellers at present. This analysis is further confirmed on the three day chart with the trend having transitioned to bearish towards the end of October, with a conservative entry set up duly arriving, as we now await a confirming signal from this indicator. The trading indicator has remained firmly bearish since this signal arrived on the daily chart.
Crude oil is now attempting to build a platform of support in the $85 per barrel region, but if this is breached, as expected, then we will see oil prices continue to move lower in the short term to test the $79 per barrel area in due course. This now seems increasingly likely given the deep resistance now immediately above, in the $88 to $92 per barrel area, as any attempt to breach this level will require sustained buying volumes, which are currently not in evidence in the oil market.
By Anna Coulling