WTI drops heavily back to a 38.2% Fibo retracement level, bears in control

  • Maximum pressure campaign on Iran remains.
  • Week sees an aggressive sell-off of over 6.5% down to trendline support.

West Texas Intermediate crude continued to bleed out on Friday due to concerns over rising inventories despite the renewed positive sentiment around US and Chinese trade relations. WTI spot dropped below the 55 handle from a high of 55.66 to a low of 54.46 while futures for October delivery lost 24 cents, or 0.4%, to settle at $54.85 a barrel on the New York Mercantile Exchange completing a 3% decline for the week. 

Focus is on Iran

" While the fears of Iranian sanction easing, and a fairly bearish fundamental outlook for 2020 from the IEA has sentiment on edge, we think the downside move as been exaggerated," analysts at TD Securities argued:

"The maximum pressure campaign on Iran remains and potential avenues to ease the sanctions, such as renewing waivers, is unlikely to see Iranian production increase any time soon. Meanwhile Saudi's new energy minister and the Aramco IPO also suggest the Kingdom could be more aggressive with cuts in 2020 if needed. On the CTA front, WTI buying remained intact after the late-day rally, but remains on thin ice with $54/bbl serving as key selling levels. Meanwhile, CTAs have turned sellers in both Brent and heating oil, while gasoline trades near the $1.54/gal selling trigger."

WTI levels

A daily doji was marked which equated to an aggressive sell-off of over 6.5% down to trendline support. The 38.2% Fibonacci retracement of the July swing highs to May-July horizontal support has so far held up which guards 53 the figure and the 23.6% Fibo of the same range. The upside target is the 78.6% Fibo and Sep highs in the 58.70s. 


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