WTI crude oil price is trading slightly above its open price at $41.77. Despite the limited movement on the commodity, however, technicals suggest that there is some upside potential ahead of crude oil price despite the uptick in US crude oil inventories yesterday.
According to the Energy Information Administration (EIA), the amount of crude oil held in storage by commercial firms picked up by 4.9 million barrels last week. This was more than the 2.1 million deficit that analysts had anticipated. Usually, a higher number would be bearish for crude oil price because it would suggest that demand for the commodity would be slower because of the surplus in inventory.
However, technicals on WTI crude oil inventories suggest otherwise.
On the 1-hour time frame, it can be seen that WTI crude oil price has pulled back some of its gains to the 50% Fib level. The commodity has also recently started to make higher lows after a couple of lower lows. Consequently, an inverse head and shoulders chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bullish indicator. If there are enough buyers in the market, WTI crude oil price could soon trade higher to $42.32 where the commodity topped on July 21.
On the other hand, a close below today’s Asian session low around $41.49 could invalidate the bullish indicator. It could mean that there are still sellers left in the market that could push the commodity to yesterday’s lows at $40.96. If support at this price does not hold, WTI crude oil price could trade to as low as $40.32 where it may test the rising trendline for support.