The U.S. benchmark for crude-oil prices faces a crossroads, from which it will either find support and push higher or tumble.
West Texas Intermediate crude prices on the New York Mercantile Exchange had topped $60 a barrel this month for the first time this year, but nagging worries about mounting crude inventories in the U.S. and global markets appear to have put a limit on the commodity’s price gains.
On Friday, June crude rose 0.5% for the week for it is ninth straight weekly gain, but settled at $59.69 a barrel, down 19 cents, or 0.3%, for the session.
West Texas Intermediate crude reached a “price exhaustion point” around $61.70 a barrel, said Fawad Razaqzada, technical analyst at FOREX.com.
On Monday, crude-oil futures were mixed with WTI oil trading on the Nymex up 12 cents, or up 0.2%, at $59.77, jumping after fighting in Iraq and Yemen sparked fears of supply disruptions, while July Brent crude was down 37 cents, or 0.6% lower, at $66.44.
That is a price level that corresponds with the 161.8% Fibonacci extension of the last notable downswing we saw between February and March,” he said, referring to a mathematical method some analysts and traders use to calculate resistance and support levels for oil prices.
.
“The breakdown of a bullish trend line and the psychological hurdle at $60 are unnerving traders even more,” Razaqzada said.
He said key support is at $58.35 and if taken out, that could pave the way for a potential drop in WTI prices to $56 or even $54 during the week ending May 22, he said.
Similarly, Darin Newsom, a senior analyst at DTN, warned of a potential end to the trend of upward prices for oil.
On Friday, oil took its cue from the moves in the U.S. dollar DXY, +0.76% falling sharply when the greenback strengthened, then significantly paring losses when the dollar turned lower against its major currency rivals.
Where crude has been in an uptrend, the U.S. dollar has “established both a major (long-term) and secondary (intermediate-term) downtrends on monthly and weekly charts, respectively,” said Newsom.
But initial price resistance for oil is pegged at $58.60 a barrel and a close below that support could trigger a selloff, especially if the U.S. dollar rallies, Newsom said.
By Myra P Saefong
