Crude Oil Price Update – Sustained Move Under $36.07 Could Trigger Near-Term Break to $28.86

U.S. West Texas Intermediate crude oil futures dropped more than 8% a barrel on Thursday, fueled by renewed concerns about demand destruction as new cases of coronavirus jumped globally. Sellers also reacted to the Fed’s bleak outlook for the economy and a sharp rise in U.S. crude inventories.

U.S. coronavirus cases surpassed 2 million on Wednesday, according to a Reuters survey, and new infections ae rising slightly after five weeks of declines. While most states have loosened restrictions on movement that shackled demand, fuel consumption remains 20% below typical levels, as consumers remain cautious.

The U.S. Federal Reserve also made bearish comments about economic growth that could lead to limited demand for crude, gasoline and distillates.

At 20:14 GMT, July WTI crude oil is trading $36.31, down $3.29 or -8.31%. The low of the session is $35.41.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on June 8.

A trade through $40.44 will negate the closing price reversal top and signal a resumption of the uptrend.  The main trend will change to down on a move through the last swing bottom at $31.14.

The minor trend is down. The minor trend turned down on Thursday when sellers took out $37.07. This also confirmed the shift in momentum to down.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $40.50 is controlling the longer-term direction of the market.

The short-term range is $31.14 to $40.44. Its retracement zone at $35.79 to $34.69 is the primary downside target.

The best potential support is a price cluster at $36.07 to $35.79. Since the main trend is up, buyers could come in on a test of this area. If this area fails as support then look for the selling pressure to increase with $28.86 to $26.12 the next major downside target zone.

Short-Term Outlook

The longer-term direction of the July WTI crude oil futures contract is likely to be determined by trader reaction to the long-term Fibonacci level at $36.07.

Holding this level will signal the return of buyers. This could trigger a rally back to $37.93. Sellers could stop the move. If buyers can overcome this level then look for the rally to possibly extend into $40.44 to $40.50.

Taking out $36.07 will indicate the selling pressure is getting stronger, however, the break could be a little labored at $35.79 to $34.69.

The trigger point for an acceleration to the downside is $34.69. If sellers take out this level then look for a steep break into $31.14, followed by $28.86.

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