Another day and another negative one for crude oil, which has continued to moved lower once again, gathering momentum as it does. Today’s price action has been no great surprise following yesterday’s weak attempt to rise, with the high of the session running into the resistance in place at the $94 per barrel level, before closing below the potential support area at $92.90 per barrel. This level duly capped this morning’s effort to recover lost ground, before moving sharply lower through the US session to currently trade at $91.53 per barrel. The key now is whether the well defined platform of support as defined with the blue dotted line, holds firm. If it does, then it may provide a platform for a short term bounce higher, but any close below, either tonight or in the next few days, will then increase the bearish sentiment for oil, and a move through $90 per barrel is likely to see $86 per barrel tested in due course.
The associated volumes of the last few days, also confirm the bears are fully in control of this market, with yesterday’s price and volume a classic example of a weak rally in a weak market. If tonight’s closing volume exceeds that of yesterday as expected, then from a volume price analysis perspective, this will further confirm the heavily bearish picture. Indeed, even today’s modest decline in oil inventories at Cushing did nothing to stem the flow, and despite coming in on target with a draw of -1.0m bbls, over supply issues in the pipelines still dominate, and with global economies struggling, coupled with a potential slowdown in China, the longer term outlook remains bleak. And then of course, there’s the US dollar, which is also playing it’s part. The slippery slope just got steeper!
By Anna Coulling