Crude Oil Price Update – Hedge Funds Watching 200-Day Moving Average at $60.78

U.S. West Texas Intermediate crude oil futures are trading slightly lower early Friday as bullish traders try to claw back some of yesterday’s steep 2.81% loss. Instead of being content with tightening supplies, traders are now worried about increasing supply from the United States and Saudi Arabia.

In the U.S. crude oil production hit a record 12.3 million barrels per day (bpd) during the week-ending April 26, rising around 2 million bpd over the past year, according to data from the Energy Information Administration (EIA). Additionally, U.S. crude exports broke through 3 million bpd for the first time this year. Furthermore, a consensus of analysts now say that Saudi Arabia and its allies would likely fill the supply gap created by the expanded sanctions against Iran.

At 06:45 GMT, June WTI crude oil is trading $61.73, down $0.08 or -0.15%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. It turned down last Friday when sellers took out the previous main bottom at $63.15. The main trend will change to up on a move through $66.60. This isn’t very likely, but the market is down eight sessions from that top which puts it inside the window of time for a closing price reversal bottom. The main bottom comes in at $58.41.

The minor trend is also down. It will change up on a trade through 64.75. As long as the minor trend is down, the momentum will trend lower.

There have been several swings in the market leading up to the $66.60 main top. However, we’re going to focus on the two major price swings.

The first price swing of interest was formed by the October 3, 2018 main top at $75.65 and the December 24, 2018 main bottom at $43.80. Its 50% to 61.8% retracement zone is $59.73 to $63.48.

This one is controlling the longer-term trend. Currently the market is trading inside this zone, creating a neutral tone.

The second price swing is $43.80 to $66.60. Its retracement zone is $55.20 to $52.51. If the 50% level at $59.73 fails as support then look for the selling to extend into its retracement zone. This could be the next major value area.

Daily Swing Chart Technical Forecast

Based on yesterday’s price action and today’s early trade, it looks as if the direction of the June WTI crude oil market on Friday is likely to be determined by trader reaction to the 200-day moving average line at $60.78. This moving average is closely watched by the hedge and commodity fund traders.

Bullish Scenario

A sustained move over $60.78 will indicate the presence of buyers. They are likely to be fund traders defending the uptrend created by the 200-day moving average. If they can create enough upside momentum then look for a retest of the major Fibonacci level at $63.48.

Bearish Scenario

A sustained move under $60.78 will signal the presence of sellers. This will be the first sign that longs are bailing out. This should lead to a test of the major 50% level at $59.73. Selling pressure should increase under this level with $58.41 the next target.

If $58.41 fails as support then look for an acceleration to the downside with the next major downside targets the main bottom at $55.31 and the 50% level at $55.20.