Daily Crude Oil
For oil traders and speculators over the longer term, red had certainly been the dominant color over the last two months with the WTI contract falling from a high of $76.91 per barrel to today’s current price of $51.27 per barrel Crude oil fell below the psychological $50 per barrel price before recovering ahead of the FOMC minutes.
The question now is whether this longer-term trend will continue lower, or whether oil has reached the bottom. The answer to this question lies with the weekly chart more so than the daily. On the daily timeframe it has been a consistent and relentless series of steps lower on rising volume, punctuated with weak rallies. We now have a chart with extremely strong price resistance in place at the $66 level, which also coincides with the volume point of control, both of which are adding their weight to the heavily bearish picture, which is confirmed by the trend monitor indicator at the bottom of the chart.
Weekly Crude Oil
On the weekly chart we see perhaps the most revealing price action from last week and the associated volume, especially compared to October’s volume in the price waterfall. First consider the last three weeks, with widening price spreads, and yet the volume is starting to decline, albeit with Thanksgiving to consider. That said, the price action of last week was the widest to date, and yet the volume associated with it, is less or at least equivalent to the previous two weeks, where the spread of price action has been narrower yet volume is the same. In addition, compare the volume to that to the left of the chart in 2017. Hardly dramatic and one would have expected to see a significant volume bar associated with such extreme price action. So a clear anomaly, and suggesting the big operators are no longer participating, with a congestion phase likely to develop, and which may in turn develop into a reversal higher. Another factor of course is the US dollar, and following the comments from Chairman Powell yesterday who used the words ‘just below’ when referring to the neutral level for interest rates, any further sustained US dollar weakness would only help to provide further support for oil prices, unaided by any intervention by OPEC.