WTI drops below key support structure, eyes $51.41 key level

• WTI has finally given out and has dropped to a low of $52.26bbls spot after breaking the ascending channel’s support.  
• $51.41 is the 27th fractal low target to confirm a change of flow which will jeopardise the reverse H&S and ABCD bullish formation within the ascending channel.  

The move appears to be techncial with no significant headlines out specifically pertaining to the price of oil. However, volume has started to pick up and the support structure at $53.00/50 gave out.  

We had the EIA report that revealed a smaller-than-expected weekly fall in U.S. natural-gas supplies while a risk-off tone developed with the Dow falling 350 points to session lows as Fed’s Kudlow said that there is a ‘sizable distance’ that remains in China-U.S. trade talks which strips out the demand side scenario again. The European Commission has slashed growth forecasts for the Eurozone for 2019 and 2020, further stoking concerns of a global growth slowdown. The dollar is strong and there are also reports out that Libya could soon increase production which could bring more oil to the market.

“As the supply-side comes back into the picture, General Haftar’s capture of Sharara likely suggests that the oil field, which is the country’s largest, will resume full operations in short order. While this will likely lead to a dip in OPEC’s over-compliance, we suspect the market will ultimately shrug this off in the near-term, considering that OPEC+ supply outlook remains fairly tight. Meanwhile, firm downward momentum will keep CTAs from covering their shorts for a while yet,”

analysts at TD Securities explained.

WTI levels

The price has broken the 21-D SMA and channel/neckline support which brings in the 51.41 level as the 27th fractal low target. RSI and MACD are negative and volume is with the move.