WTI: Still Bearish

The December contract for WTI continues its heavily bearish tone with the contract moving lower once again in yesterday’s oil trading session to close at $93.03 per barrel, and moving the commodity closer to a key support level in the $92 per barrel region, from where the commodity staged a dramatic rally back in late June.

The decline in WTI (as opposed to Brent) has come as no great surprise to oil traders for several reasons. First, from a fundamental perspective tensions in Syria now appear to have calmed, and with it the prospect of a tightening of oil supplies due to any conflict in the region. Second, throughout this period, and certainly since September, the general trend in weekly oil inventories at Cushing has been one of sustained builds and therefore not suggesting a high demand for oil.

Moving to the technical picture the break below the psychological $100 per barrel level was pivotal, and was further reinforced with very high and rising volume under the three consecutive candles which duly followed. The subsequent bounce higher was short lived with weak volume signalling its early demise, with the rally duly snuffed out by heavy selling pressure in consequent down candles as the commodity lurched lower once again. Last Tuesday’s wide spread down candle gave further evidence of the current selling pressure with the commodity continuing to sell off.

Moving forward, and as mentioned above, WTI is at a critical price point, and with a dense region of price congestion now building between $94 and $95 per barrel, as shown by the volume at price histogram the outlook remains bearish. Even more so if the support at $92 per barrel fails to hold. Should this occur then expect to see oil prices move even lower to test the next important price region at $89.50 per barrel in the short term.