WTI oil prices traded around $59.75, experiencing a 0.5% decline during the early European session. The market is affected by oversupply concerns after OPEC+ increased December output targets by 137,000 barrels per day, mirroring the October and November targets.
The oil price did not strongly respond to potential positive impacts from the US government funding progress. After Democratic lawmakers backed the funding bill in the Senate, it moved to the Republican-led House, potentially boosting oil demand with government reopening.
Wti Trading Patterns
Daily, WTI is trading within a Descending Triangle formation, aiming to break past the boundaries of the pattern. The price hovers near the 20-day EMA, indicating a sideways trend, with the potential to drop to October’s high of $57.43 if it breaches November 6 low of $58.75.
In contrast, a rise above the August 6 high of $66.00 could lead to the July peaks around $68.00 and $70.00. The 14-day RSI stands between 40.00-60.00, signalling reduced volatility.
WTI oil inventory reports, released by API on Tuesdays and EIA on Wednesdays, greatly influence trading. Changes in inventory levels, whether indicating increased supply or demand, reflect broader trends in the market.
The oil price has been trading sideways near $60 for almost two weeks, showing significant indecision in the market. We are watching the price move within a Descending Triangle formation, a pattern that often precedes a sharp downward break. The low volatility, confirmed by the RSI indicator staying between 40.00 and 60.00, signals that a larger move could be building.
Oversupply concerns have recently become more concrete, weighing on the price. Last week’s Energy Information Administration (EIA) report for the week ending November 7th showed a surprise inventory build of 2.1 million barrels, against analyst expectations of a small draw. This aligns with the announced OPEC+ supply increases for December, strengthening the case for a bearish outlook.
Market Outlook and Strategy
The potential demand boost from the recent reopening of the US government has failed to push prices higher. This factor seems to be overshadowed by the more immediate reality of growing global oil stockpiles. Looking back, we saw a similar technical setup in the fourth quarter of 2023, which led to a sustained price drop of over 15% in the following weeks.
For derivative traders, this suggests positioning for a breakdown is the more probable strategy. Buying put options with strike prices at or below $57.00 offers a way to capitalize on a potential drop while defining your maximum risk. Alternatively, establishing a bear put spread could lower the cost of entry if implied volatility is high.
The key level we are monitoring is the November 6 low of $58.75. A sustained break below this price would act as a trigger, likely sending WTI down towards the October high of $57.43 and then the critical support level from April at $54.80. Any move above the $66.00 resistance level would be needed to invalidate this bearish perspective.
