- Oil risks deeper pullback on evidence of rising US drilling activity.
- Bearish doji reversal seen in the daily chart also favors downside in the short-run.
US oil prices are trading on the back foot in Asia, courtesy of the persistent rise in the US drilling activity.
As of writing, WTI Oil is changing hands at $70.40/barrel, representing a 0.42 percent drop on the day. The front-month contract rose to $71.88 last week – the highest level since November 2014 as markets priced in a drop in Iranian oil exports after US sanctions are reimposed on the OPEC heavyweight.
However, the rally ran out of steam on speculation the OPEC members will likely compensate for the drop in the supplies from Iran. Further, Baker Hughes data released on Friday showed the US drillers added 10 oil rigs in the week to May 11, pushing the total count to 844, the highest level since March 2015.
So, a drop in oil prices does not come as a surprise. The daily chart shows oil created doji candle on Thursday and closed on a negative note on Friday, confirming a bearish doji reversal. Hence, a correction could be on the cards.
WTI Oil Technical Levels
Despite the bear doji reversal, the primary trend remains bullish as indicated by the ascending (bullish) 5-week MA, 10-week MA and 5-month MA and 10-month MA.
Key support: $69.56 (April 19 high), $67.64 (May 8 low)
Key resistance: $71.88 (May 10 high), $74.93 (October 2011 low)
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