Crude Oil – Weekly Analysis, 27/08

Aug 27, 5:15 am

Crude Oil prices remain under pressure with the lower end of 35.1 being a possible price level
Crude Oil futures fell -1.39% yesterday to close at 38.9 a barrel despite the US EIA weekly crude oil inventories showing the US commercial stockpiles falling 5.5 million barrels for the week ending August 21st. Despite the fall in Crude Oil inventories, gasoline and other fuels stockpiles remained high pushing the total stock of refined products in the US to 1.283 billion barrels. The US stockpiles continue to remain at record highs since 1990’s.

Crude Oil saw a rough week and perhaps a rough month too, with the weekly change being -2.16%. Prices briefly touched historic lows to 37.83 this week before managing to bounce off these lows. The renewed bearish momentum engulfed the Oil markets after prices saw a consolidation take place in the past  five months since February which led to a modest bounce in Crude Oil prices to test the highs of 62.57 in May this year. There could be further downside in store for Crude Oil with the eventual declines likely to the target the lows of $32.5 in the next few months as Crude Oil could remain under pressure with producers unwilling to slow down production amidst concerns of a serious economic slowdown from China. These factors combined could keep Crude oil prices suppressed for the medium term.

Crude Oil Technical Analysis

The daily charts for Crude Oil shows prices currently trading within the range high and lows of 40.47 and 37.76, formed on the 24th of August. This short term consolidation could see a potential break out in either direction within the next couple of daily or weekly sessions. To the upside, a break above 40.47 could most likely see a test to the previously broken support at 42.39 to establish resistance. While to the downside, a break below 37.76 could see a test to 35.11 which marks the previous lows formed in December 2008.

Crude Oil Daily Chart, 27/08
Crude Oil Daily Chart, 27/08

On the 4-hour chart for Crude Oil, we notice that price has been trading in the major support level taken off the weekly/monthly charts. After testing the lower end to 37.80, Crude oil has managed to trend higher but the resistance at 39.68 has contained the prices for now. We could however expect a possible break of 39.68 which could also see a break of the trend lines as well. In such as scenario, Crude Oil could possibly dip back lower in order to establish support at 39.68, which could then see a test to 41.40 and eventually to 42.40. This scenario shows a confluence with the daily chart’s consolidation pattern that we have mentioned.

Crude Oil – H4 Chart, 27/08
Crude Oil – H4 Chart, 27/08

To the downside however a break below 37.80 will likely confirm a decline to 35.11 region of support, should the current resistance and the falling trend line manage to hold prices below the 39.68 level of resistance. The main risk to Crude Oil prices will be today’s US revised second estimates of the quarterly GDP, which could potentially strengthen or weaken the US Dollar that could impact the Crude oil prices in the near term.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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