Crude Oil Price Update – Underpinned by Weaker Dollar but Demand Worries Capping Gains

U.S. West Texas Intermediate crude oil futures are edging higher on Tuesday as a softer U.S. Dollar helped offset some of the worries over slowing global fuel demand growth and a bearish economic outlook from key oil importing economies like China.

At 04:48 GMT, December WTI crude oil futures are trading $84.85, up $0.27 or +0.32%. On Monday, the United States Oil Fund ETF (USO) settled at $70.40, down $0.17 or -0.24%.

Weak Dollar Underpinning Prices, Economic Uncertainty Capping Gains

WTI crude oil is getting some help from a weaker U.S. Dollar early Tuesday. This is making the dollar-denominated asset more attractive to foreign buyers. At the same time, weaker-than-expected economic data from the United States and China on Monday is raising questions about future demand, capping gains.

On Monday, government data showed China’s crude oil imports in September were 2% lower than a year ago. In the U.S., business activity contracted for a fourth month in October.

Traders Eyeing Fresh Inventories Data

U.S. crude oil inventories are expected to rise this week, which could put a lid on prices. Analysts polled by Reuters estimated on average that crude inventories rose by 200,000 barrels in the week to October 21.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through $92.34 will signal a resumption of the uptrend. A move through $75.70 will change the main trend to down.

The rangebound market is currently caught inside a number of retracement levels that are controlling the price action.

On the upside, resistance is a pair of retracement levels at $85.49 and $86.82.

On the downside, support is a series of retracement levels at $84.02, $82.06 and $79.52.

Daily Swing Chart Technical Forecast

Trader reaction to $86.02 is likely to determine the direction of the December WTI crude oil market on Tuesday.

Bullish Scenario

A sustained move over $86.02 will indicate the presence of buyers. This could lead to a labored rally with potential upside targets a pair of 50% levels at $85.49 and $86.82, followed by a minor top at $87.14.

Bearish Scenario

A sustained move under $86.02 will signal the presence of sellers. The first downside target is a pivot at $84.02. Taking out this level could trigger an acceleration into Fibonacci support at $82.06, followed closely by a minor pivot at $81.30.

Side Notes

Traders seem to be comfortable with the rangebound trade so we’re expecting the trend to continue over the near-term as the market awaits the start of the European Union’s embargo on Russian oil and gas in December.

We could see some volatility at 20:30 GMT with the release of the American Petroleum Institute (API) weekly inventories report.