WTI Oil – strong pullback and subsequent swift bounce point to a healthy correction ahead of fresh push higher

WTI oil price fell sharply on Thursday (over 3%) and hit the lowest in more than one week, after unexpected and strong build in US crude stocks soured the sentiment.

The report released on Wednesday showed build of US crude inventories by almost 16 million barrels last week (vs forecast for 1.8 million barrels rise and 9 million barrels draw previous week) in the biggest jump in three years, signaling significant decrease in demand while the supply remains stable for now.

Pullback followed repeated failures to register clear break above pivotal $66.23/38 barriers (weekly cloud base /50% retracement of $77.88/$54.87 bear-leg), with short-lived upticks being capped by the top of weekly cloud.

Spike to $63.57 (the lowest since Feb 18) was followed by quick bounce (about $2 up) and suggesting that dips would be just positioning for fresh push higher.

The notion is supported by the fact that today’s dip found support just above trendline support ($63.21) and nearby ascending 55DMA ($63.38, which recently created a bull-cross above 200DMA) contributing to scenario of a healthy correction of broader uptrend that kept larger bulls intact for fresh push higher.

Technical indicators on daily chart remain in bullish configuration and continue to underpin the action and contribute to strong support from overheated geopolitical situation over potential conflict between the US and Iran, escalation of which would likely spark strong rise in oil prices.

However, break above $66.38 Fibo level and lift above weekly cloud (spanned between $66.23 and $67.23) is still required to validate signal of bullish continuation.

Res: 66.38; 66.58; 67.23; 67.73
Sup: 65.04; 64.49; 63.57; 63.21