Black clouds over black gold

In August, WTI oil wasted the chance to start a new bullish trend. As we can see on the chart, the price was approaching a neck line (51.6 USD/bbl) but the buyers failed to reach it and they did not even get chance to fight for a breakout. What stopped the appreciation was the trend line connecting recent lower highs (upper blue line). That is from the technical side, but we all know that, fundamentally, the situation is not bullish either. We do have oversupply and a very low global demand. Countries like Nigeria, Libya and Iran are increasing oil production after a cease fire with local militants or after the lifting of sanctions. This is constantly putting pressure on the price of the oil and is crushing every short-term positive set of information, no matter how few and far between. Furthermore, we do have low demand. Banks, governments and other financial institutions are constantly cutting global GDP forecasts, which show that signs of a so-called global recovery are just wishful thinking, at least for now. Low growth means low demand for oil and that is why the price is not increasing.

The closest support is 43 USD/bbl and this is very important because it is not only a horizontal level, but also a trend line connecting recent higher lows (bottom of the head and right shoulder). A bearish breakout would be a mid-term trigger for a new downswing.

As long as the price stays between 51.6 USD/bbl and 43 USD/bbl we are in a side trend and traders should await a breakout.

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