Crude oil prices breakout of two month downtrend

Crude oil prices, including both the US West Texas Intermediate and international Brent crude benchmarks, continued to surge sharply on Tuesday, extending the recent two-week rebound and recovery. In the process of this rise, prices have also broken out further above the short-term downtrend that had been in place for more than two months, since the early June highs.

The continued recovery in crude oil has been partly driven by speculation that major oil producers may finally begin to cooperate to help support crude prices, especially after recent comments by the Saudi energy minister alluded to this possible intention. Also, production declines and disruptions have become relatively widespread, including in countries such as Venezuela, Nigeria, and the United States. Additionally, the International Energy Agency projected last week that crude oil markets would see a rebalancing within the next several months, with global oil inventories finally seeing a draw towards the end of the year.

In the case of Brent crude oil, these bullish catalysts have helped to push price above several major resistance factors, including the key 46.00 level, the important 50-day moving average, and a parallel downtrend channel that has defined the noted two-month downtrend since the June highs above 52.00.

On Tuesday, Brent crude surged well above the key 48.00 prior resistance level. A major immediate risk factor for the current bullish recovery will come on Wednesday, when the US Energy Information Administration will release its weekly data on US crude oil inventories. The past several weeks of data have shown rather disappointing inventory builds against expected draws. For last week, the forecast is for a relatively modest build of around 300,000 barrels. Any substantial departure from expectations on Wednesday could prompt a significant move in crude oil prices.

Currently continuing to trade well above 48.00, Brent crude lies at a critical juncture. Continued upside momentum above 48.00 could open the way towards June’s noted 52.50-area highs, with a further upside objective at the 54.00 resistance level. Any break back down below 48.00 and back into the parallel downtrend channel would clearly be a bearish signal, in which case the two-month downtrend could resume, with key downside support around the 42.00 level and 200-day moving average.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.