This was a week of indecision for crude oil futures, with the May WTI contract ending marginally higher, following five days of price action which could best be described as ‘symmetrical’, with two down days, sandwiched between three up days as the contract finally closed at $93.71 per barrel. Much of today’s positive sentiment for oil was US dollar driven, with the US dollar index closing with a wide spread down bar on the day, having run into resistance in the 83.20 area, before trading lower at 82.52.
Monday’s price action, suggested a continuation of the recent bullish trend, which has seen the commodity recover from the low of $89.78 per barrel on the 4th of March and duly confirmed with the isolated pivot low, but this was not to be. Tuesday’s wide spread down candle accompanied with high volume, hinted at a possible reversal once again, but this was promptly reversed on Wednesday with the weekly fundamental oil stats reporting a draw of 1.3 million barrels, against a forecast build of 1.8 million barrels. However, whilst the numbers surprised the oil market with crude oil prices gaining on the news, the weekly report also highlighted that demand for oil was in fact falling, with petroleum demand at 17.77 million barrels a day, almost 5% lower than the previous week.
Thursday and Friday’s price action, then followed those of earlier in the week, ending on a positive tone this evening with a wide spread up candle, which tested the $94 per barrel area before falling back to close the week and the oil trading session at $93.71 per barrel. So the question now, is where are WTI oil futures heading in the short to medium term?
From a technical perspective, the most significant price area on the daily chart is that shown by the green dotted line at the $91.75 price area. This was the price level that was breached back in December, and following the breakout from this range, saw oil rally to test the $100 per barrel region before pulling back sharply. This is a key level, and as we can see from this week’s price action, one which has provided a platform of support, particularly on Thursday when tested, but which duly held firm. Should this continue to hold as expected, then this will provide the necessary platform of support for any further move higher.
Moving to the volume bars on the daily oil chart it is interesting to note that the bullish trend of the month to date has been accompanied, generally, by rising volume, a confirmation signal of strength in the trend. The selling volume on Tuesday and Thursday, whilst high, was absorbed by the market, suggesting that the bulls remain in control for the time being. The key now is a move beyond the interim resistance level now in place at $94.50 per barrel, and should this be breached next week, then expect to see the WTI contract move higher once again, and on to test the underside of the next area of resistance at $96.50 per barrel and beyond.
By Anna Coulling
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