Crude Oil Price Update – Weak Longs Book Profits Following GDP Setback

U.S. West Texas Intermediate crude oil futures settled lower on Thursday as concerns about a potential global recession that would knock energy demand offset lower U.S. crude inventories and a rebound in gasoline consumption.

On Thursday, September WTI crude oil futures closed at $96.42, down $0.84 or -0.86%. The United States Oil Fund ETF (USO) finished at $77.13, down $0.74 or -0.95%.

The market reversed earlier gains after the U.S. Commerce Department reported the world’s biggest economy unexpectedly contracted in the second quarter, fueling concerns about a recession that could hit energy demand. According to the report, consumer spending grew at its slowest pace in two years and business spending declined.

Selling was limited, however, since the supply situation remains tight and expectations are for only a mild recession at this time.

Daily Swing Chart Technical Analysis

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

A trade through $100.99 will change the main trend to up. A move through $88.23 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through $94.30 will change the minor trend to down. A move through $93.01 will reaffirm the change in trend.

The minor range is $100.99 to $93.01. The market closed on the weak side of its pivot at $97.00, making it resistance.

The short-term range is $111.14 to $88.23. Its 50% level or pivot at $99.69 is resistance. This level stopped the buying on Thursday at $99.69.

Another short-term range is $88.23 to $100.99. Its retracement zone at $94.61 to $93.10 is the next downside target and potential support.

Short-Term Outlook

Trader reaction to the minor pivot at $97.00 will determine the direction of the September WTI crude oil market early Friday.

Bearish Scenario

A sustained move under $97.00 will indicate the presence of sellers. If this creates enough downside momentum then look for a break into the short-term retracement zone at $94.61 to $93.10, followed by a minor bottom at $93.01.

Look for an acceleration to the downside if $93.01 is taken out.

Bullish Scenario

A sustained move over $97.00 will signal the presence of buyers. This could trigger a surge into the 50% level at $99.69. This is the last potential resistance before the main tops at $100.99 and $102.00.