Although U.S. crude oil supplies fell 300,000 barrels for the week-ending May 17, according to an Energy Information Administration (EIA) report, traders seemed to be more focused on outside markets and economic data for information this week.
This week’s drop of 300,000 barrels followed last week’s slide of 600,000 barrels, but supplies remained 1.1% above last year’s levels. According to the EIA, inventories are “well above the upper limit of the average range for this time last year.” This is the best explanation as to why the market, despite seemingly friendly fundamentals, is having trouble breaking out over the top of 2013 range.
The weekly chart has clearly defined tops at $97.38, $98.22 and $99.77. These levels are providing solid resistance. This week, traders challenged the first level, but sellers stopped the rally at $97.35, triggering the start of a weekly decline. Based on the last rally from $86.16 to $$97.38, the current break has put the market in a position to test the retracement zone of this range at $91.77 to $90.45.
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Besides the swing tops and bottoms, a huge triangle chart pattern on the weekly chart is holding the market in check. Next week, the resistance line in this triangle drops in at $97.38. On the downside, the support angle moves up to $86.67. A long-term view of this chart pattern suggests that the market could remain range bound for several months albeit in a pretty…