Crude Oil Pressure Persists

Andreas Thalassinos
Andreas Thalassinos

27.9.2024

Crude oil prices have been in a downward trend since July 5, with a bearish reversal pattern confirming the shift. Key technical indicators point to continued bearish pressure, as crude trades below its 50-period EMA, and both the Momentum oscillator and RSI signal weakness. On the upside, key resistance levels to watch are $72.171, $78.412, $80.261, and $84.677, while potential support areas could be found at $65.523, $63.804, $61.415, and $54.767. Market fundamentals have added more pressure, with Saudi Arabia planning to increase production and weak demand from China, driving US crude prices down by 7.4% from Tuesday's high of $72.171 to yesterday's close.

Overview

Crude oil prices have been in a downward trend since July 5, with a bearish reversal pattern confirming the shift. Key technical indicators point to continued bearish pressure, as crude trades below its 50-period EMA, and both the Momentum oscillator and RSI signal weakness. On the upside, key resistance levels to watch are $72.171, $78.412, $80.261, and $84.677, while potential support areas could be found at $65.523, $63.804, $61.415, and $54.767. Market fundamentals have added more pressure, with Saudi Arabia planning to increase production and weak demand from China, driving U.S. crude prices down by 7.4% from Tuesday's high of $72.171 to yesterday's close.

Key Economic Events

Friday 15:30 (GMT+3) - Canada: GDP m/m (CAD)

Friday 15:30 (GMT+3) - USA: Core PCE Price Index m/m (USD)

Technical Analysis

Since July 5, crude oil prices have been on a steady decline after pulling back from a high of $84.677 per barrel. A bearish reversal pattern, known as a failure swing, has fueled this downward trend. The peak at $83.814 couldn't break past the previous high, and when prices dropped below $80.900, it confirmed the beginning of a technical downtrend.

Technical signals further support this bearish outlook. Crude oil is trading below its 50-period Exponential Moving Average (EMA), indicating ongoing downward momentum. The Momentum oscillator is still below 100, and the Relative Strength Index (RSI) remains under 50, both indicating that selling pressure is likely to persist. These signals suggest that crude oil prices could continue to face downward pressure in the near term.

Potential Upside Targets  

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

72.171: The initial resistance is 72.171, which aligns with the swing high from September 24.

78.412: The second price target is identified at 78.412, corresponding to the daily high marked on August 26.

80.261: The third target is established at 80.261, aligning with a peak formed on August 12.

84.677: An additional price target is estimated at 84.677, corresponding to the peak established on July 5.

Potential Downside Targets  

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

65.523: The first level of support is seen at 65.523, representing the daily low established on September 10.

63.804: The second support level is identified at 63.804, representing a weekly low.

61.415: The third support level is at 61.415, corresponding to the 161.8% Fibonacci Extension drawn from the swing low of 65.523 to the swing high of 72.171.

54.767: An additional downward target is observed at 54.767, reflecting the 61.8% Fibonacci Extension drawn from the swing low of 65.523 to the swing high of 72.171.

Fundamentals

U.S. crude oil prices experienced a sharp decline of nearly 7.5% since Tuesday, closing under $68 per barrel, after reports emerged that Saudi Arabia plans to increase oil production in December. Sources referenced by The Financial Times indicate that, Saudi Arabia is prepared to boost output even if it leads to a sustained period of lower prices, stepping away from its informal target of $100 per barrel.

Energy markets reflected this sentiment, with the November West Texas Intermediate (WTI) contract settling at $67.67 per barrel, a 2.9% drop, while Brent crude fell by 2.53% to $71.60 per barrel. RBOB (Reformulated Blendstock for Oxygenate Blending) gasoline futures saw a 1.93% decrease, and natural gas prices dropped by 1.4%.

Additionally, market pressures intensified due to the likelihood of increased production in Libya after a political resolution was reached, and weak demand in China, the largest importer of crude, further contributed to the price decline despite recent stimulus measures from Beijing.

Conclusion

In conclusion, crude oil prices have been under significant pressure since July, driven by a confirmed bearish reversal pattern and weak technical indicators. With key support and resistance levels identified, traders are watching closely for potential shifts in market momentum. Fundamental factors, including Saudi Arabia's planned production increase and soft demand in China, have accelerated the downward trend, leading to a sharp drop in prices. As these conditions persist, crude oil may continue facing bearish pressure in the near term.

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.