Nothing seems to move the crude oil price from the current levels. It just hovers around $41-$42, lacking direction.
However, a triangle appeared on the hourly timeframe, pointing to a possible bearish break. Before anything, speculators should wait for the series of higher lows to be broken as a sign confirming the bearish bias.
U.S. Oil Inventories Point to Higher Demand
Yesterday’s U.S. crude oil inventories declined by more than anticipated. The difference of 1.1 million barrels shows the demand is on the rise and should have acted as a catalyst for higher crude oil prices. Instead, the market did nothing in a typical summer trading session. But the inability of price to react on good news may signal weakness.
Crude oil had a dramatic 2020 so far. After the negative $40 for the May 2020 futures contract, a precedent appeared. Market participants now know that anything is possible, and caution is the name of the game.
Demand is far from being where it was prior to the coronavirus health crisis. The decline in oil prices let many oil producers slashing their plans, reducing investment, and cutting back on expansion plans.
Because economies around the world do not show a V-shape recovery, the demand for oil should follow a similar path – sluggish, slow increase as the world fights its way out of the crisis.
Crude Oil Price Technical Analysis
The triangle forming on the hourly chart may act as a continuation pattern as well. At this point, because the price pierced the upper trendline, it looks like a reversal pattern.
However, trading it at the market is risky. Therefore, any bearish trade should come only after the price invalidates the series of higher lows. At that point, the crude oil price signals a new trend started, and traders may go short with a stop-loss at the last swing in the triangular formation. As for the take profit, either target a new low below the $39 level or use a risk-reward ratio bigger than 1:2.
Don’t miss a beat! Follow us on Telegram and Twitter.
Crude Oil Price Forecast
More content
- Download our latest quarterly market outlook for our longer-term trade ideas.
- Follow Mircea on Twitter.
- Do you enjoy reading our updates? Become a member today and access all restricted content. It is free to join.