Crude Oil Price Update – Large Gasoline Stocks Draw Sparks Impressive Upside Reversal

U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Wednesday after reversing early session losses.

Prices were boosted by a drop in Treasury yields, which fell after the release of softer-than-expected U.S. consumer inflation data. The news drove down the U.S. Dollar, increasing foreign demand for the dollar-denominated asset. Prices were also lifted by strong evidence of gasoline demand in a weekly inventories report.

At 18:30 GMT, September WTI crude oil futures are trading $91.66, up $1.16 or +1.28%. The United States Oil Fund ETF (USO) settled at $74.55, up $1.10 or +1.49%.

US Headline, Core Consumer Inflation Post Smaller-than-Expected Increases

The headline consumer price index for July rose 8.5% year over year, and was flat compared to June. Economists surveyed by Dow Jones were expecting increases of 8.7% and 0.2%, respectively.

Core inflation, which strips out volatile food and energy prices, also saw a smaller-than-expected increase.

Lower inflation could encourage the Fed to rein in the size of future rate hikes, pressuring the U.S. Dollar. A lower dollar could drive up foreign demand for crude oil.

Energy Information Administration Gasoline Inventory Data Bullish

U.S. crude oil stocks rose by 5.5 million barrels in the most recent week, the U.S. Energy Information Administration said, more than the expected increase of 100,000. However, U.S. gasoline stocks fell sharply as implied demand rose after weeks of lackluster activity during what is supposed to be peak summer driving season.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on August 5.

A trade through $87.01 will negate the chart pattern and signal a resumption of the downtrend. A move through $101.88 will change the main trend to up.

The minor trend is also down. A trade through $92.65 will change the minor trend to up. This will confirm the shift in momentum.

On the downside, the major support is the long-term retracement zone at $89.54 to $82.80. This zone stopped the selling at $87.01 on August 5.

On the upside, the nearest resistance is a minor pivot at $94.45, followed by a short-term 50% level at $99.22.

Short-Term Outlook

Trader reaction to the long-term 50% level at $89.54 will determine the direction of the September WTI crude oil market into the close on Wednesday.

Bullish Scenario

A sustained move over $89.54 will indicate the presence of buyers with $94.45 the next potential target.

Bearish Scenario

A sustained move under $89.54 will signal the presence of sellers. This could trigger a break into $87.01. Taking out this level will blow up the potentially bullish chart pattern.