US Oil Sinks to Significant Levels

USOil, Daily

USOil prices slipped down to under $61.20 yesterday, (November 7) as the EIA Inventories showed another weekly build. This week it was over a 5.8 million barrel rise in crude stocks. The market had been expecting a 2.0 million barrel increase, though the API reported a 7.8 million barrel build after the US close on Tuesday (November 6). So far today, the price is up 0.15% at $61.64, consolidating recent sharp losses which yesterday culminated in that $61.20, an eight-month low and the weekly 200-period moving average.

This is now the fifth consecutive week that crude prices have declined. The inventory data this week, together with recent supply increases by Saudi Arabia and Libya and the US vetoes on Iranian export sanctions have collectively been keeping a lid on oil-related markets.

So with sentiment and fundamentals still weighing on the price where do we go from here? The fourth quarter is traditionally a positive one for oil prices, as demand for Heating Oil and its derivatives tends to rise during the northern hemisphere winter months. However, technically,  the pressure is to the downside too.

The weekly chart broke below the 2018 supporting trend-line last month (October 28) as it breached, significantly, below the 50-period moving average, before yesterday’s stall at the 200-period moving average. Next support is the monthly trend line at $60.50 and the 50.0 Fibonacci Level at $59.40.  The daily time frame has been below the important 20-day moving average since October 11, the 50-day moving average since October 17 and the key 200-day moving average since October 23. RSI and the Stochastic Indicator are both now significantly oversold at 25.2 and 4.5, respectively. However, with the 38.2 Fibonacci at $63.75 and the 200-day moving average at $66.40, a recovery of some 8.5% is required to pull the price back to these levels.