Crude Oil Price Update – Trend Changed to Down on Demand Worries Ahead of API Inventories Report

U.S. West Texas Intermediate crude oil futures are down sharply late in the session on Tuesday amid fears that fuel demand could soften as global central banks raise interest rates to fight stubbornly high inflation. Traders are also expressing disappoint that unrest in Iraq failed to disrupt supply exports.

Bets on another supersized Fed rate hike (75-basis-points) are boosting the dollar, putting pressure on demand for dollar-denominated crude oil. Prices are also retreating after comments from Iraq’s state-owned marketer SOMO that the country’s oil exports had been unaffected by unrest.

At 19:09 GMT, October WTI crude oil futures are trading $91.94, down $5.07 or -5.23%. The United States Oil Fund ETF (USO) is at $75.48, down $3.21 or -4.08%.

In other news, traders are now preparing for the release of the American Petroleum Institute’s (API) weekly storage report at 20:30 GMT. The report is expected to show U.S. crude oil stockpiles rose, while fuel stocks fell in the latest week. Crude stocks rose by about 593,000 barrels for the week-ended August 26, according to the estimates.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier in the session when sellers took out the swing bottom at $91.08. A trade through $97.66 will change the main trend back to up.

On the downside, potential support is a minor pivot at $91.52, followed by a long-term 50% level at $88.26.

On the upside, resistance is a short-term 50% level at $92.56, followed by a short-term Fibonacci level at $94.26.

Short-Term Outlook

Trader reaction to the minor pivot at $91.52 is likely to determine the direction of the October WTI crude oil futures contract into the close on Tuesday.

Bearish Scenario

A sustained move under $91.52 will indicate the presence of sellers. If this produces enough downside momentum then look for the selling to possibly extend into the major 50% level at $88.26.

Bullish Scenario

A sustained move over $91.52 will signal the presence of counter-trend buyers. This could lead to a test of the short-term Fibonacci level at $94.26. This is also a potential trigger point for an acceleration to the upside with $97.66 the next potential target.