WTI tumbled on Wednesday after China said that it will impose tariffs of 25% on USD 16bn worth of US imports, a retaliation to the US announcement on Tuesday that it will proceed with similar measures on the 23rd of August. Although crude oil will be exempted from China’s list, several other oil products are still included. What’s more, the slide may have been amplified by the less-than-expected decline in crude inventories reported by the US Energy Information Administration.

From a technical standpoint, the tumble brought the price below 66.30 for a while, to find fresh support near 65.80, before rebounding back above 66.30. The 66.30 barrier has been acting as the lower bound of a short-term sideways range that’s been containing the price action since mid-July and thus, bearing in mind that the price recovered back within the range, we will stay sidelined for now.

We would like to see another attempt for a dip below the range’s lower end, or even better yesterday’s low of 65.80, before we start considering the likelihood for further declines. Such a dip is possible to open the way for our nest support territory of 64.25, defined by the lows of the 19th and 21st of June.

That said, WTI would still be trading above the long-term tentative uptrend line drawn from the low of the 21st of June 2017 and although the short-term picture would appear to be bearish, we would like to see a decisive close below that line and the 63.40 support level before we start examining the case of a longer-term trend reversal.

Indeed, taking into account the sanctions imposed to Iran by the US on Monday, there is a decent chance for any further declines in oil prices to stay limited on speculation of supply disruptions. Although this round of sanctions will not directly target Iranian oil exports, a second one, which will focus on Iran’s oil industry, is planned for November. On top of that, using his twitter account, US President Trump said that “Anyone doing business with Iran will NOT be doing business with the United States”, further adding to concerns over supply shortfalls.

Now if the bulls decide to take charge from current levels and not let WTI to exit the short-term range again, we may see a test near the 67.15 line soon, the break of which may target our next resistance of 68.10. Another break above 68.10 could open the way towards the 69.15 line or the upper bound of the aforementioned range, at around 69.90.

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