WTI Crude – Bearish Pressure Remain Despite Price Stabilizing below 94.2

Crude Oil prices have stabilized a little after the slide seen during Friday’s US session. However, this hardly means that bearish pressure has abated. In fact, S/T outlook for WTI remain extremely bearish when we consider that latest military skirmish in Iraq over the weekend has failed to send oil prices climbing.

Besides geopolitical issues, latest DOE inventory data released last Friday similarly failed to ignite a bullish response. Even though Crude inventory decline more than twice as expected – an indication of higher implied demand, WTI prices remained flat when the news was released, highlighting the strong bearish pressure that is allowing price to ignore bullish fundamental factors.

Hourly Chart

From a technical point of view, prices is also finding trouble breaking the soft resistance of 94.2, underlining the strong S/T bearish pressure that we are under right now. As long as price stay below 94.2, the likelihood of a bearish push in the near future towards the descending trendline remains. Stochastic readings remain pointing higher though, and with some distance left before hitting Overbought, we could still see a break of 94.2. However, considering that Stoch levels are much higher than before, while price is clearly lower, this divergence suggest that any bullish scenario should be discounted. Even in the event that price breaks 94.2, it is highly unlikely that 95.0 round figure resistance will be touched, not to mentioned breach with Stoch levels already close to Overbought.

Weekly Chart

Weekly Chart is bearish as well with prices breaking 98.0 support and the rising trendline. Perhaps more importantly, last week’s decline resulted in Stochastic curve pointing lower, invalidating the previous bullish cycle signal which was formed in conjunction with prices climbing back up above the aforementioned 98.0 support and confluence with rising trendline back then. The invalidation of such a strong bullish signal highlights once again the magnitude of current bearishness, and opens up a long-term target of 80.0 with 90.0 as interim support.

This long-term bearishness is in line with broad macro economic trend which suggest that demand for Crude would be lower this year. Then again, considering that Crude Oil has ignored 2 fundamental development in the past 2 trading days, it is highly unlikely that current decline was inspired by broad macro trends. It is more likely that the sharp decline seen may be related to short-term speculation/profit taking compounded by lack of trading volume during Christmas season. As such, do not be surprised if we suddenly see Crude climbing out of nowhere in the near term as price has similarly declined out of nowhere to begin with.

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