Important week for Crude oil, WTI testing key support

Crude oil has been falling for more than two weeks now as supply concerns in Iraq have diminished while in Libya, two major oil ports have re-opened. But the trend could change again this week, especially for the WTI contract, ahead of some key oil reports. The American Petroleum Institute (API) and Energy Information Administration (EIA) will published their usual weekly crude stockpiles data tonight and Wednesday, respectively. Then on Thursday we will have the OPEC’s monthly oil report, followed by the International Energy Agency’s (IEA) version on Friday. So, come the end of the week, we will hopefully have a much better understanding of the supply and demand factors affecting the price of oil. This thus presents us the perfect opportunity to briefly review the technicals:

WTI is currently testing a key support level around $103.25/45 and what it does here could determine direction for at least the next few days – barring any major fundamental stimulus of course. The $103.25 level ties in with a bullish trend line that goes back to the start of the year. Thus there’s a good chance it will hold firm upon the first test as bearish speculators are likely to at least reduce some of their positions there. What’s more, the 50-day moving average comes in just ahead of this level at $103.45, making $103.25/45 a key support area. If support does hold here then it may be worth watching the $104.00 area for resistance. And if price manages to hold above $104.00 then we could see a run towards $105.00, which was previously support and resistance. Meanwhile, should the trend line break then there are not a lot of support levels on the way down until $102.00 or $101.40 – the latter being the 38.2% Fibonacci retracement level of the up move from the January low. It may be worth watching the RSI, which is currently testing its own corresponding trend line. If the RSI breaks its trend line in advance of price then that would serve as a warning sign for the bulls.

Brent, meanwhile, continues to break down support after support. Today, it has broken below the 50% retracement level ($109.80) of the up move from the April low. The 61.8% Fibonacci level of the same price swing comes in at $108.45. However it may not immediately get there for the 200-day SMA is standing on the way at just below the $109.00 mark. Some of the potential resistance levels to watch are at 110.40 (50-day SMA), $111.00 (old support & resistance) and $113.00.