West Texas Intermediate crude is beginning to consolidate from five-month lows, and speculation on whether demand increased for refineries given the black gold a little life. The Energy Information Administration (EIA) will release weekly inventory data tomorrow. Inventories rose 2.6 million barrels, and the market is expecting a .2 million barrel decrease in this week’s inventories.
The daily chart of WTI crude shows the large downward channel with price action consolidating within a sideways channel where price action remains retained. Technically, the trend is still heavily bearish with the momentum still favoring the bears. Whether or not refineries have increased demand is still to be seen, and one EIA report should not be seen as a trend change.
A bullish report should boost price action to the top of the consolidating range near $95.54 per barrel. The 20 EMA could add resistance at the top of the consolidation range, but a break above this could challenge $96 per barrel. Conversely, a bearish report could throw crude back under $93 per barrel.
Tim Evans, an energy analyst at Citi Futures Perspective, said “The market is stabilizing and consolidating as we wait for fresh news.” The negotiations with Iran will continue in an attempt to stop the nuclear power program in an exchange for lesser severity in economic sanctions, which has decimated Iran’s economy. Allegation arise that Iran is using nuclear energy and medical research as a cover for weapons.
There is optimism that talks will eventually result in favor for both parties, but another fall through could have crude swinging in either direction.