The price of WTI Crude Oil (CFD: USOil) traded at its lowest levels in 42 trading days or since May 11. The shortened week showed dual risks building up as inventory showed less demand than anticipated. The weak DOE data on Thursday was followed by a strong Non-Farm Payroll that may act as a boost for the US Dollar.
This week's inventory data continued the trend over the last 6-weeks of draws on the stock of U.S. Crude Oil Inventory. We simply had a smaller draw than expected which was enough to send WTI Crude Oil below previously identified support of ~$45/bbl.
Another building fundamental story to keep an eye on before we get to the charts is the increase in exports from Russia. An encouraging story has been the balancing out of the supply glut even as the price of Oil. However, Russia may be the new OPEC in terms of threatening the recovery. Since July 2014, Russia's shipments have increased, and their YoY shipments have increased 4.9%.
That being said, we could be seeing a new wave of supply coming onto the market, and if Demand cannot keep up, we could move lower. To explain how much lower, let's move on to the charts.
As US Dollar Has Support, Watch Polarity Level on USOil At ~$45/bbl
We've long been a fan of the 55-Day Moving Average as a rudder on medium term Crude Oil sentiment. Currently, Oil is trading below the 55-DMA at $47.54/bbl. The Fibonacci-Sequence Based Moving Average has held as safe support for nearly four months now. This week's break could prove significant, and now we will use the 55-DMA as resistance as we brace for a move lower.
As of Friday, the price of USOil is approaching the Weekly S2 Pivot at $44.17/bbl. If we break below this point of support, we will likely be aiming towards the first significant Fibonacci Support of the February to June range.
A break below the $45/bbl level, which has acted as recent support, would open up the scenario of further weakness toward the 38.2%-61.8% retracement zone of the February-June rally. This zone is around $41.85-$35.81/bbl. US Dollar strength would hasten such a move.
