Crude Oil Price Update – Economic Fears Sink WTI Futures

U.S. West Texas Intermediate crude oil futures plunged on Thursday extending its significant losses from the previous session. This week’s sell-off reflected lingering concerns about the outlook for demand amid the possibility of a recession.

Oil prices were also pressured by uncertainty about future production from the Organization of the Petroleum Exporting Countries and its allies, also known as OPEC+.

Traders expect OPEC+ to stick with its previously announced plans to increase output by 648,000 barrels per day in July and August. However, its plans for September are still uncertain.

On Thursday, August WTI crude oil futures settled at $105.76, down $4.02 or -3.66%. The United States Oil Fund ETF (USO) finished at $80.35.

In other news, a report from the Commerce Department provided further evidence of an economic slowdown, showing personal spending increased by less than expected in the month of May.

Personal spending edged up by 0.2 percent in May after climbing by a downwardly revised 0.6 percent in April. Economists had expected personal spending to increase by 0.5 percent compared to the 0.9 percent advance originally reported for the previous month.

Short-Term Outlook

Trader reaction to the short-term Fibonacci level at $106.31 is likely to determine the direction of the August WTI crude oil futures contract early Friday.

Bearish Scenario

A sustained move under $106.31 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to extend into the main 50% level at $103.85. If this fails then look for a test of the main bottom at $101.53.

Taking out $101.53 will change the main trend to down, making the main Fibonacci level at $99.82 the next likely target area.

Bullish Scenario

A sustained move over $106.31 will signal the presence of buyers. This could lead to a labored rally with upside targets a minor 50% level at $107.79, a minor 50% level at $109.06 and a short-term retracement zone at $111.21 to $113.49. This is the last resistance area before the $114.05 main top.

A trade through $114.05 will reaffirm the uptrend. It’s also a potential trigger point for an acceleration to the upside.

Side Notes

Watch the price action and order flow on a test of $103.85 to $99.82. This zone is controlling the near-term direction of the market.