After a volatile trading session for the WTI futures (NYMEX: CL), the trading day ended relatively flat, as mixed signals from economic reports caused uncertainty in the market. While optimistic supply-side developments offered initial support, the uncertain demand outlook capped the upside, enforcing an intraday correction in the Wednesday session.
The futures initially made gains on reports that Russian crude shipments for the four weeks to July 16 reached 3.1 million barrels per day (bpd), a new six-month low. However, the EIA on Wednesday reported a lower-than-expected drawdown in crude inventories, with the -0.708M barrel change missing the -2.44M consensus. The release sparked a profit-taking movement that reversed the intraday gains, as the futures trickled down to a 0.49% daily loss. As we advance, a weakening Chinese demand outlook could weigh on the futures, but with the supply cuts from Saudi Arabia and Russia taking effect, it could be a volatile environment in the upcoming weeks.
Technical
On the 4H chart, a longstanding ascending channel holds firm after resisting an attempted breakout that failed to sustain. However, the channel support now looks vulnerable, with the daily pivot point at $75.73 per barrel (BLL) providing resistance to the upside.
A breakdown at $75.11/BLL, also at the 50-day moving average, could trigger a lower shift toward $74.58/BLL (S1). An additional leg lower could confirm the sustainability of the break, bringing support at $74.02/BLL and $72.72/BLL into play.
However, if the channel support, backed by the 50-day moving average, holds, a breakout at the $75.73/BLL pivot could trigger a continuation within the channel toward $76.43/BLL (R1). To test the strength of the channel resistance, the upward momentum could reach higher resistance at $77.22/BLL in the upcoming sessions.
Summary
While the supply-side developments support the upside in the oil futures, an unpredictable demand environment continues to invite volatility into the market. If the futures break down the channel support at $75.11/BLL, the downside could trickle toward $74.58/BLL. Conversely, an attempt to break through the pivot point at $75.73/BLL could be on the cards if support holds.
Sources: Koyfin, Tradingview
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