WTI bulls struggle at trendline resistance capped by 50-DMA

• WTI prices are struggling into the G7 this weekend on growth fears.
• With a focus on the downside, a break of 55 and the trendline support,  bears can target a drop to the 52 handle.

West Texas Intermediate crude ended down -0.91%, having travelled between a high of $56.44 and a low of $54.88bbls while WTI crude for October delivery on the New York Mercantile Exchange fell 33 cents, or 0.6%, to settle at $55.35 per barrel. The price of oil was weighed down by expectations for surplus supplies ahead of what could shape up to be an eventful weekend of headlines following the Jackson Hole and G7.  

A volatile market for the foreseeable future

Essentially, traders can expect a volatile market for the foreseeable future while there are arguments for both the demand and supply side of the equation. ‘The global supply narrative has continued to pump out a positive narrative, with the latest OPEC compliance data showing continued over-compliance, but demand fears continue to place a cap on the complex. This suggests that CTAs could be whipsawed for a while longer, as momentum signals prompt the algos to buy high and sell low, with prices largely remaining range-bound,” analysts at TD Securities argued.  

Meanwhile, energy markets shrugged off the bearish inventory report from the DOE which saw products build on net. “While increased refinery runs helped drain crude inventories, weaker apparent demand has seen the products go into storage, which could ultimately see refinery runs remain below average in the coming months if the trend continues. In addition, the majority of the inventory declines have come from Cushing as new pipelines divert flow to the Gulf Coast, but with the Brent-WTI differential narrowing, exports are less favorable, and inventories in the Gulf Coast continue to increase,” the analysts at TD Securities added.  

WTI levels

The price continues to hold above the 20-daily moving average but was capped by the 50-DMA, below  the downside trendline.  On a reemergence of the bulls, which have  manage a higher high and low on Tuesday and now Wednesday as well, there will be scope for a recovery to the 58 handle to meet trend line resistance. With a focus on the downside, a break of 55 and the trendline support,  bears can target a drop to the 52 handle and the 61.8% Fibo at 51.70 on the wide.