Crude Oil Under Pressure: Navigating Bearish Signals and Market Uncertainties

Crude oil has been on a downward trend since early July, which is marked by technical bearish signals. These technical patterns, supported by oscillators and moving averages, indicate continued downward pressure on prices ahead of the upcoming release later today of the EIA Crude Oil Stocks Change.
Key resistance and support levels highlight crucial points where the trend could either reverse or intensify. Additionally, last week’s unexpected crude inventory increases and geopolitical tensions further complicate the market outlook.

Wednesday 17:30 (GMT+3) – USA: EIA Crude Oil Stocks Change (USD)

Thursday 10:15 am (GMT+3) France: Flash Manufacturing PMI (EUR)

Thursday 10:15 am (GMT+3) France: Flash Services PMI (EUR)

Thursday 10:30 am (GMT+3) Germany: Flash Manufacturing PMI (EUR)

Thursday 10:30 am (GMT+3) Germany: Flash Services PMI (EUR)

Thursday 11:30 am (GMT+3) UK: Flash Manufacturing PMI (GBP)

Thursday 11:30 am (GMT+3) UK: Flash Services PMI (GBP)

Thursday 15:30 (GMT+3) USA: Unemployment Claims (USD)

Thursday 16:45 (GMT+3) USA: Flash Manufacturing PMI (USD)

Thursday 16:45 (GMT+3) USA: Flash Services PMI (USD)

Thursday 17:00 (GMT+3) – USA: Existing Home Sales (USD)

Friday 01:45 am (GMT+3) – New Zealand: Retail Sales q/q (NZD)

Friday 12:30 pm (GMT+3)- Canada: Retail Sales m/m (CAD)

Friday 17:00 (GMT+3) – USA: New Home Sales (USD)

Crude oil has been on a downward trend since July 5, when it reached $84.27 per barrel. This was indicated by a bearish Japanese candlestick pattern called a Shooting Star. The price then formed a bearish chart pattern known as a failure swing, where the peak at 83.12 failed to surpass the previous peak at 84.27, and prices dropped below the trough of 80.49. On July 25, a third bearish signal was seen with the 20-period Exponential Moving Average (EMA) crossing below the 50-period EMA, resulting in a strong

bearish crossover called a “Death Cross.” Both the Momentum oscillator and the EMAs also support a bearish outlook for Crude Oil. The Momentum registers values below the 100 baseline, while the short EMA is below the long EMA, and both lines point downward. Additionally, the Average Directional Movement Index indicates a downtrend.

Should the buyers take market control, traders may direct their attention toward the four potential resistance levels below:

79.49: The first price target is seen at 79.49, reflecting the daily high marked on August 12.

80.49: The second target is identified at 80.49, representing the swing low formed on July 10.

83.12: The third price target is determined at 83.12, which corresponds to the swing high established on July 12.

84.27: An additional resistance is seen at 84.27, aligning with a peak formed on July 5.

Should the sellers keep market control, traders may consider the four potential support levels listed below:

72.41: The primary downside target is identified at 72.41, corresponding to the (S2) support calculated using the weekly Pivot Points standard method.

71.58: The second support level is 71.58, representing the daily low marked on August 5.

69.74: The third support line is established at 69.74, representing the (S3) support estimated using the weekly Pivot Points method.

66.69: An additional downward target is observed at 66.69, computed as the 161.8% Fibonacci Extension between the low point, 71.58, and the high point, 79.49.

Last week, Oil prices declined after a US government report revealed an unexpected increase in Crude stockpiles, with inventories rising by 1.36 million barrels, breaking a six-week streak of declines. This led to a 1.8% drop in West Texas Intermediate, which settled below $77 per barrel, while Brent fell below $80. The surprise build raised concerns about a potential global Oil surplus later in the year. Despite the dip, gasoline and distillate inventories decreased, indicating ongoing demand during the summer driving season. Meanwhile, US inflation data aligned with expectations and geopolitical risks, particularly concerning Iran and Israel, continue to loom over the market.
Analysts forecast a 2.0 million barrel decrease in crude oil inventories later today, which could increase the price of crude oil.

In summary, bearish technical indicators and patterns currently dominate the crude oil market, signaling sustained downward momentum. The interplay of resistance and support levels will be critical in determining the future trajectory, while fundamental factors, such as inventory fluctuations and geopolitical risks, add layers of uncertainty. Traders should remain vigilant, as the market’s direction hinges on these key elements.