Crude Oil Price: Technical Preview

By:
on Oct 24, 2014
Updated: Apr 9, 2020
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Crude Oil futures for December delivery made a spike to the upside on news that Saudi Arabia had reduced its Oil production in September. However, the brief rally ended after making an intra-day high of $81.87. Technically speaking, this spike was mostly a run up to fill the down gap that had formed on account of new contracts being started for December delivery.

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Earlier this week, the weekly Crude oil inventories showed that US oil inventories exceeded forecasts showing ample supplies. There were calls by OPEC countries, led by Venezuela calling for a special meeting to cut Oil production, but countries like Kuwait and Saudi Arabia had signaled in the past(as recently as last week) that they wouldn’t be responding to the calls for reducing output by cutting supplies.

This however is seemingly contradictory of the news that the oil rich kingdom had cut its supplies by 328k barrels a day to 9.36 million in September, as reported by Dow Jones newswires. The lower cost of Crude Oil would have an economic impact especially on countries such as Iran, Russia and Venezuela while at the same time improving the margins for shale oil drilling (mostly in the US).

Crude Oil Technical Analysis

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In last week’s analysis of Crude Oil, we made a mention that the support zone near 78 – 80, if holds could see a minor rally. Crude Oil futures in fact did rally to test the technical resistance at 82.5 and current price action looks to test the 82.5 level again as the down gap between the new futures contract for December delivery is yet to be filled and so does the previous month’s gap at 85.49. It is essential to bear these gaps in mind as a bullish turn around in Crude prices could see price targeting these gaps.

Figure 1: Monthly Crude Oil Resistance Levels on a rebound

The above chart shows the updated monthly crude oil chart with the possible resistance levels should we see a rebound from the main support level at 78.7. Last week, Crude oil made an intra-day low towards this level, hitting 79.09 before promptly closing back near 82.33

On the intra-day charts, we notice price breaking out of the down sloping channel with 81.12 and 80.17 being the key technical support level that will have to be broken before price can resume lower. It most probable that another test of 78.70 will be seen before Crude oil can technically bounce off this level to head back towards 85.8 for a renewed bearish momentum.

Figure 2: H1, Oil Charts

A decline from the current levels could likely see a test of the minor trend line and the first support level. If this level holds, we could probably see a major correction preparing to get underway with the obvious target of $82 – $85 and above.

Crude Oil Pivot Levels

 
 
R3
 
R2
 
R1
 
Pivot
 
S1
 
S2
 
S3
 
Daily
 
85.09
 
83.72
 
82.79
 
81.42
 
80.49
 
79.12
 
78.19
 
Weekly
 
91.76
 
88.55
 
85.35
 
82.14
 
79.01
 
75.86
 
72.64
 

 

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