Oil Quotes Are Declining. A Few Trading Ideas

Since the beginning of this week, the bearish sentiment has been prevailing in the market of "black gold". Yesterday, the U.S. Energy Information Administration published a rather optimistic report. At the same time, falling of futures for the WTI crude oil exceeded 4.5%, which was the largest decline in the last two years.

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Source: finviz.com


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Let's consider the given statistics in more detail:


- oil inventories: -12.633 million barrels;

- gasoline inventories: -0.694 million barrels;

- distillates inventories: +4.125 million barrels;

- oil production: 10.900 million b/d

Despite a significant reduction in oil inventories in the US, aggressive sales were observed in the "black gold" market. This is primarily due to the escalation of trade conflict between the US and China. The US plan to introduce additional duties on goods from China $200 billion worth. It should be recalled, that earlier Washington introduced import duties on $34 billion worth of Chinese goods. Oil production in the US is still at record high levels, which puts additional pressure on the oil quotes dynamics.


In June, world oil supplies, according to the IEA, rose by 370.000 barrels per day to 98.8 million barrels per day, mainly due to the increased production by OPEC countries.


Let's consider the current technical pattern


Support levels: 70.50 USD, 69.25 USD, 67.25 USD

Resistance levels: 72.50 USD, 74.50 USD

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At the moment, oil quotes are consolidating near the support level of 70.50. The 72.50 mark is already a "mirror" resistance. The MACD indicator has moved to the negative zone and continues to decline, which signals the power of sellers. We do not exclude further correction.


We recommend opening positions from the key support and resistance levels.


If the price fixes below the support level of 70.50 USD, a further drop in quotes is expected. The movement is tending to the 50.0%-61.8% correctional zone (69.00-68.00).


Alternative option. If the price fixes above the "mirror" resistance level of 72.50 USD, it is necessary to look for entry points to the market to open long positions. The immediate goal of profit taking is the key offer zone of 74.50-75.25.


When following the positions, one should use a trailing stop.