Crude Oil Price Update – Momentum Shifted to Upside Ahead of Today’s API Inventories Report

U.S. West Texas Intermediate crude oil futures are trading higher on Tuesday as worries about tighter supply helped shift momentum to the upside. The main catalyst behind today’s price surge is Saudi Arabia floating the notion of OPEC+ production cuts to support prices. An early prediction of a drop in U.S. crude inventories is also helping to drive prices higher today.

At 11:25 GMT, October WTI crude oil futures are trading $91.83, up $1.47 or +1.63%. On Monday, the United States Oil Fund ETF (USO) settled at $74.70, up $0.64 or +0.86%.

In keeping with its long-term plan to stabilize crude oil prices, OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, said OPEC’s leader, Saudi Arabia, on Monday and reported by Reuters.

Short-Squeeze Brewing

Saudi Arabia is complaining about futures market liquidity being one reason for lower prices, but liquidity works both ways.

Even though they warn about the market being vulnerable to supply disruptions, I can see a short-squeeze developing if Wednesday’s U.S. Energy Information Administration’s (EIA) report produces bullish results.

According to reports, underlining tight supply, the latest weekly reports of U.S. inventories are expected to show a decline of 1.5 million barrels in crude stocks. The first of this week’s two reports is out at 20:30 GMT from the American Petroleum Institute (API).

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher.

A trade through $94.17 will change the main trend to up. A move through $85.37 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. The minor trend changed to up earlier today when buyers took out $91.69. The new minor bottom is $86.28.

On the downside, the minor support is a pivot at $89.77. This is followed by a long-term 50% level at $88.26.

On the upside, the nearest resistance is a short-term retracement zone at $92.56 to $94.26.

Daily Swing Chart Technical Forecast

Trader reaction to $89.77 is likely to determine the direction of the October WTI crude oil market into the close on Tuesday.

Bullish Scenario

A sustained move over $89.77 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the short-term 50% level at $92.56.

Overtaking $92.56 will indicate the buying is getting stronger. This could trigger a rally into the resistance cluster at $94.17 to $94.26.

The short-term Fibonacci level at $94.26 is a potential trigger point for an acceleration to the upside with $99.75 to $100.41 being the next target area.

Bearish Scenario

A sustained move under $89.77 will signal the presence of sellers. This could trigger a break into the major 50% level at $88.26. Breaking this level will be a sign of weakness and it could trigger a retest of the main bottom at $85.37.