Crude Oil Analysis: Rates and Inventories

WTI Analysis: Oil has been trading within a consistent range across the month of May
Crude Oil inventories have declined for two consecutive weeks, pausing the nearly two-month downtrend
Higher rates for longer threaten oil demand potential

Bearish sentiment is looming on oil charts with demand potential in question amid the wait for further inflation cooling statistics. FOMC member speeches followed by the release of FOMC minutes are eagerly waited for insights into the future of monetary policies. These insights translate directly into the demand potential reflected on oil charts. For the third consecutive week, Oil is trading back near the 77-zone, with crude oil inventories poised to influence either a trend continuation or reversal on Wednesday.

Currently, oil is experiencing its largest yearly correction, with double bottom support indicated by recent lows near the 76.80 and 76.50 lows consecutively. These levels serve as critical support barriers prior to further downtrends.

Crude Oil Analysis: USOIL - Daily Time Frame – Logarithmic Scale

From a head and shoulders perspective, oil’s trajectory is poised towards 74.80, following the breakout below the 76 level. The inability to break lower with positively supporting fundamentals can drive oil back into its monthly range. A consecutive breakout above 8014 would then set the next upward direction near 81 and 83, consecutively.

On the other side, the SPDR Energy Select sector has rebounded from a 100% Fibonacci extension of its three-legged correction. It is now trending back above its 1.3-year resistance level.

Crude Oil Analysis: XLE – 3-Day Time Frame – Logarithmic Scale

However, with dominant price action leaning towards a neutral to bearish sentiment across both charts, fundamental developments are awaited to boost volatility beyond the defined monthly range.

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