September Crude Oil futures finished the week sharply lower at $44.19, down $2.46 or -5.27%. The weekly loss was driven by concerns over potentially higher Iraqi crude exports, bearish U.S. inventory data and a stronger U.S. Dollar.
Also driving the market lower on Friday was a report from oilfield services firm Baker Hughes which said the number of rigs operating in the United States rose for a fourth consecutive week, increasing by 14 to a total of 371 rigs.
According to new loading data and an industry source from the Middle East, Reuters is reporting that Iraq’s oil exports are set to rise in July. Exports from southern Iraq in the first 21 days of July have averaged 3.28 million barrels per day. This is up from 3.18 million barrels per day in June.
Last week, the U.S. Energy Information Administration reported that crude inventories fell at 519.5 million barrels, its ninth straight decline. However, U.S. crude and oil product stocks rose 2.62 million barrels to an all-time high of 2.08 billion barrels as gasoline stocks posted a surprise summer build of 911,000 barrels.
The U.S. Dollar rose sharply last week, putting pressure on foreign demand, as investors increased the chances of a U.S. Federal Reserve interest rate hike before the central bank’s December meeting.
Technically, the main trend is up according to the weekly swing chart. However, momentum is to the downside, a move confirmed last week when crude oil crossed to the weak side of a long-term Gann angle. The main trend will turn down on a trade through $38.67.
The short-term range is $38.67 to $52.73. Its retracement zone at $45.70 to $44.04 is currently being tested with the market closing in a position to take out the lower or Fibonacci level. This could lead to early selling pressure this week.
The main range is $32.85 to $52.73. Its retracement zone is $42.79 to $40.44. This zone is the primary downside target.
Based on the close at $44.19, the direction of the market this week is likely to be determined by trader reaction to the Fib level at $44.04.
Holding above $44.04 will indicate the presence of buyers. This could generate enough upside momentum to trigger a rally into a resistance cluster at $45.70 to $45.73.
A sustained move under $44.04 will signal the presence of sellers. The first target is the main 50% level at $42.79. The weekly chart opens up to the downside under this level with the Fib level at $40.44 the next target.
Watch the price action and read the order flow at $44.04 all week. Trader reaction to this level will tell us if the selling is getting stronger. If the market continues to walk down the steep angle currently at $45.73 then look for a test of $44.04 the week-ending September 2, 2016.