Current trend

Throughout August, the price of WTI Crude Oil tries to break through the strong resistance area of 83.40–90.95 upwards against a reduction in oil inventories in the United States. However, the slower recovery of the Chinese economy caused the redirection of investor capital to other assets and, as a result, corrective dynamics of quotations.

Thus, according to the latest report from the Energy Information Administration of the US Department of Energy (EIA), the volume of oil reserves was corrected by –5.960M barrels, gasoline – by 0.261M barrels, while distillate reserves, on the contrary, increased by 0.296M barrels. However, the statistic did not act as a driver of the upward dynamics of the instrument, as traders focus on Chinese statistics, believing that energy consumption in the country may have already reached its peak this year. Thus, July oil imports fell to a six-month low, and a significant part of previously purchased volumes remains in tanks. In turn, industrial production in July fell to 3.7% YoY compared to 4.3% a month earlier. Unemployment is also rising, reaching 5.3%. However, the People’s Bank of China officials stressed that they would continue to pursue “precise and decisive” policies to maintain the momentum of the country’s economic recovery, and State Council Premier Li Qiang even promised that the authorities would achieve annual goals for gross domestic product (GDP) growth of the level of 5.0%.

Thus, if China fails to cope with the current challenges, oil prices will remain under pressure and may continue to fall to the 67.15 area.

Support and resistance

The long-term trend remained down after testing the 83.40–80.94 key zone at the beginning of the month. Accordingly, if pressure from the “bears” continues, the quotes will move toward the support level of 74.50. If 74.50 is broken during the trading session, the next sell target will be 67.15. For purchases and a change in trend, an update of the August maximum is necessary, the upward dynamics will intensify to the area of 89.77.

The medium-term trend is upward, and now, the price is trading in a correction. Market participants have already tested the key support zone 79.11–78.53, which is still held by buyers, allowing them to consider long positions with the target at last week’s high of 84.77. If the area 79.11–78.53 is broken, the medium-term trend will change to a downtrend. In this case, it is worth considering short positions in the asset with the target at 73.31–72.73.

Resistance levels: 93.50, 89.77, 83.40.

Support levels: 74.50, 67.15.

Trading tips

Short positions may be opened from 80.95 with the target at 74.50 and stop loss around 83.90. Implementation period 9–12 days.

Long positions may be opened above 83.90 with the target at 89.77 and stop loss around 81.10.