August Crude Oil futures plunged this week and are in a position to post a nearly 6% loss for the week as investors reacted to a volatile U.S. Dollar, driven by fears of a Britain exit from the European Union. The biggest fear is that a vote to leave the EU will plunge the Euro Zone into a recession, leading to a drop in demand for crude oil.
Besides the fear of a UK exit from the EU, other factors contributed to this week’s rapid decline including a rise in the U.S. rig count and a lower-than-expected drawdown in U.S. crude inventories in spite of peak summer driving demand in the United States.
The lingering production disruptions in Nigeria seemed to take a backseat this week perhaps under the assumption that other countries will make up the shortfall, or the problem would be resolved. Traders also had a muted reaction to the International Energy Agency’s proclamation that the crude oil market is essentially balanced at this time.
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Technically, the main trend is up according to the weekly swing chart. However, the current price action suggests a shift in momentum and investor sentiment is taking place. In plain talk, the market is simply pulling back after a nine-week rally.
The short-term range is $38.14 to $52.28. This makes its retracement zone at $45.21 to $43.54 the primary downside target next week. Since the main trend is up, buyers are likely to step in on a test of this zone in an…