Crude Oil Prices May Struggle at Trend Top, Inventories and OPEC+ Eyed
CRUDE OIL OUTLOOK:
- Crude oil prices up in risk-on trade as London reopens after bank holiday
- Follow-through may be limited as trend-defining chart barrier approaches
- API and EIA inventories data, OPEC+ meeting are in the spotlight ahead
Crude oil prices have largely reflected broader sentiment trends recently. The WTI benchmark has tracked higher alongside the bellwether S&P 500 stock index – a proxy for investors’ mood market-wide – over the past week. The US Dollar fell in the meanwhile, offering USD-denominated commodity a further lift.
Looking ahead, a seemingly convincing risk-on lead bodes well for oil prices. There is some sense of catch-up exuberance, with London taking its turn to price in Friday’s fireworks having been closed for a bank holiday on Monday. Scope for follow-through may be limited however considering yesterday’s timid US trade.
On the data front, the weekly inventory report from API is now in focus. It will be weighed against forecasts calling for a 2.6-million-barrel draw to be reported in official EIA statistics on Wednesday. Follow-through may be somewhat limited however as traders eye this week’s OPEC+ meeting.
The group – comprising the OPEC cartel and major like-minded producers, like Russia – will discuss its coordinated output scheme. An increase in output may be in the cards, which might dovetail with the restoration of output in the US following Hurricane Ida to pressure prices.
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CRUDE OIL TECHNICAL ANALYSIS
An upswing in late August has brought crude oil prices back within striking distance of key resistance guiding them lower since a top was marked by a bearish Evening Star candlestick pattern early July (as expected).
Neutralizing near-term selling pressure appears to call for a daily close above the 69.77-70.80 region. From there, prices may extend upward to challenge the swing high at 74.23, with perhaps a bit of friction in the 72.17-78 inflection area along the way.
A dense layer of support rests in the 66.35-68.00 zone. Securing a foothold back below its lower boundary may bring prices downward to challenge the major support shelf at 61.56 anew. A bit of back and forth around the minor barrier in the 63.53-81 band might be in the cards if such a move is to materialize.
Crude oil price chart created using TradingView
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--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.