U.S. West Texas Intermediate crude oil futures are edging lower early Friday on expectations of more crude supply after a compromise deal between leading OPEC producers and a surprisingly poor weekly reading on U.S. fuel demand.
At 05:53 GMT, September WTI crude oil is trading $71.22, down $0.16 or -0.22%.
To recap the events leading up to this week’s sell-off, on Wednesday, Reuters reported that Saudi Arabia and the United Arab Emirates had reached an accord that should pave the way for a deal to supply more crude to a tight oil market.
Also on Wednesday in the United States, a large drawdown in crude stockpiles did little to boost prices as investors focused on rising fuel inventories in a week that included the Fourth of July holiday, when driving usually surges.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The formation of a secondary lower top this week is also potentially bearish.
A trade through $70.10 will signal a resumption of the downtrend. A move through $74.90 will change the main trend to up.
On the upside, potential resistance is a 50% level at $71.96 and a short-term retracement zone at $73.08 to $73.79.
The nearest support is a 50% level at $70.33.
The main range is $61.06 to $76.07. Its retracement zone at $68.57 to $66.79 is the primary downside target.
Daily Swing Chart Technical Forecast
The direction of the September WTI crude oil futures contract on Friday is likely to be determined by trader reaction to $71.38.
A sustained move under $71.38 will indicate the presence of sellers. This could create the downside momentum needed to challenge $70.33 – $70.10.
Taking out $70.10 will reaffirm the downtrend. This could trigger an acceleration to the downside with the next minor target area $68.86 – $68.57.
The primary downside target or potential value zone is $68.57 to $66.79. Counter-trend buyers could step in on a test of this area.
A sustained move over $71.38 will signal the presence of counter-trend buyers. This could trigger the start of a labored rally with potential upside targets lined up at $71.96, followed by a retracement zone at $73.08 to $73.79. Since the main trend is down, sellers are likely to come in on a test of this retracement zone. They are going to try to form another secondary lower top.