Despite a drop in inventories, WTI crude oil continued to fall in yesterday’s trading. WTI crude oil CFD finished yesterday’s trading lower at $55.64 from its opening price of $56.13.
According to the Energy Information Administration (EIA), inventories held by commercial firms fell by 400,000 barrels in the week ending on January 19. It was expected that the shortage was only at 100,00. This news should have been bullish for crude oil price because the lower supply suggests that demand for the commodity may soon pick up.
However, this was not the case. Weakness in oil has lingered following its surge brought about by tensions in the Middle East. Now that the US and Iran conflict has toned down, crude oil price has been closing lower day after day.
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Crude Oil Price Outlook
A quick look at the daily time frame of WTI crude oil would reveal that the commodity could soon find respite. Yesterday’s candlestick closed was a hammer which is widely-perceived as a bearish signal.
Zooming in to the 1-hour chart, we can see that the commodity has formed a higher low following a series of lower low. Consequently, an inverse head and shoulders pattern has formed. Crude oil price already looks like it has broken resistance at the neckline. This suggests that the commodity may soon trade higher to $57.17. This price could serve as a ceiling as the falling trend line (from connecting the highs of January 6, January 8, January 20, and January 21) and the 61.8% Fib level (drawing the Fibonacci retracement tool from the high of January 21 to the low of January 23).
On the other hand, if sellers continue to dominate today’s trading, crude oil price could fall to yesterday’s low around $54.80. If this happens, the inverse head and shoulders will have been invalidated. It could signal further weakness in crude oil price and it may head to its October 31 low at $54.00.