Daily oil prices reacted badly to yesterday's reported crude stock build of more than 5m barrels - not entirely unexpected given Tuesday's bearish API numbers, with crude prices touching a low of $62.70 per barrel before ending the day at $62.96 per barrel. As usual this dramatic fall was aided and abetted by a consequent strengthening of the US Dollar and, with the exception of the Shanghai composite, most equity markets did manage to hold onto their recent gains. However, the decline in the Shanghai Composite of almost 7% is worrying given that back in 2007 it was such a fall which heralded the start of the current financial meltdown. From a technical perspective yesterday's wide spread down bar on the daily oil chart, firmly validated the bearish engulfing candle which we analyzed in Tuesday's commentary for daily oil prices, closing the oil trading session having breached all three moving averages during the day - a worrying sign for oil bulls. What is clear from yesterday's price action is that the $69 - $73 price point is now a solid object in the way of any future move higher for daily oil prices, and secondly that the move lower has considerable momentum, given the spread of the candles over the last two days. In addition the fall pierced the moving averages which provided little in the way of any support, suggesting that the rally of the last two weeks has now come to a shuddering halt, crushed under the weight of the change in market sentiment. As with many other commodities which have suffered a similar fate in the last two days, such as gold and silver, the key will be whether the various technical support levels now coming into play, will provide any solid foundations, or simply be blasted out of the way as oil prices power lower. The first of these is now firmly in sight at the $61 per barrel price level, and should this fail to hold then a deeper move to the $59 price handle is likely. If this level is breached then a return to the $52 per barrel price point is likely in the medium term, and should oil prices reach this level again then this should provide the platform for any re-basing in daily oil prices.
The short term outlook is bearish, the medium term is bearish and the long term is sideways.
WTI
Support 62.67 Resistance 67.89
Support 59.40 Resistance 62.56
Support 57.35 Resistance 59.26
