November Crude Oil futures are in a position to finish flat to slightly lower this week, however, the chart pattern suggests that momentum is building to the downside. The market is pressing a short-term retracement zone which is slowing down the selling pressure. Additionally, buyers appear to be using this area as a support zone. The short-term direction of the market is likely to be determined by trader reaction to this zone.
To be more specific, crude oil has straddled the 50% level of the retracement zone at $44.28 the last four weeks. This is essentially balancing action which is being caused by both bullish and bearish fundamentals. In other words, traders aren’t sure which way they want to take the market although this week’s fourth-consecutive lower close suggests there is a growing bias to the downside.
This week’s Energy Information Administration inventories report supports the conclusion that traders are facing conflicting fundamentals or may be waiting for more definitive data that supports the case that a longer-term trend is developing.
On Wednesday, September 23, the EIA’s report for the week-ending September 18 showed a larger than expected drawdown. Crude oil stocks came in down 1.9 million barrels. Traders had priced in a 1.0 million barrel decline. This was the bullish news.
This bullish news was offset by a larger-than-expected build in gasoline stockpiles. According to the EIA,…