Despite a larger-than-expected fall in US inventories, the price of oil trades at a new weekly low ($88.27). Crude may continue to give up the climb from the monthly low ($85.73), as it looks to be reversing direction after challenging the 50-Day SMA ($96.34).

CRUDE OIL PRICE REBOUNDS AFTER 50-DAY SMA TESTING

For the second day in a row, the price of oil looks to be falling in response to the moving average’s negative slope. Crude may continue to fall in the days to come since it doesn’t seem to be affected by recent events in the US.

The Organization of Petroleum Exporting Countries (OPEC) may be influenced by the data prints, though, as the 3.326 million decline in US inventories indicates strong demand. It is unclear whether OPEC will change its output plan at its next ministerial meeting on September 5, as the most recent MOMR warns that “for 2022, world oil demand is foreseen to rise by 3.1 mb/d, a downward revision of 0.3 mb/d from last

Up until that point, the price of oil may find it difficult to hold onto the gains made from the monthly low ($85.73), as OPEC intends to “increase output by “0.1 mb/d for the month of September 2022,” and expectations for greater supply may cause headwinds for crude amid the recovery in US production.

If OPEC sticks to its current production schedule, figures from the Energy Information Administration (EIA) show that weekly field output increased from 12,000K to 12,100K in the week ending August 26 from 12,000K the previous week. These figures also show signs of stronger-than-expected demand as well as indications of higher supply, which may keep the price of oil under pressure.

That being said, the price of oil may continue to fall over the next few days as it begins a string of lower highs and lows, and the recovery from the monthly low ($85.73) may falter further as crude seems to be reacting to the 50-Day SMA’s negative slope ($96.34).

DAILY CHART OF CRUDE OIL PRICES

After finding support ahead of the former-resistance zone around the October 2021 high ($85.41), the price of oil cleared the opening range for August. However, crude trades again below the $90.60 (100% expansion) to $91.60 (100% expansion) area as it sculpts a series of lower highs and lows.

As the price of oil seems to be reacting to the negative slope in the 50-Day SMA ($96.34), the gain from the monthly low ($85.73) may continue to unravel. However, a break/close below $88.10 (23.6% expansion) is required to increase the scope for a further decrease in crude.

If the old resistance zone around the October 2021 high ($85.41) cannot be held, oil prices may move towards the $84.20–$84.60 region, expanding by 78.6%–78.6%, with the next area of interest being between $78.50–$79.80, expanding by 61.8%–61.8%.