Crude oil prices dropped by more than $2 per barrel on May 19 to reach their lowest levels in three weeks. In the final trading hour of the North American session, WTI was down by around 2.85% amid worries that rising coronavirus cases in Asia might impact the demand for crude.
In that context, WTI plunged from highs of $65.33 to reach a low of $61.98 on the day. Furthermore, worries over the surging inflation anticipations would be expected to compel the Fed’s hand to slow the American economic growth with interest rate hikes which, in turn, would dent the oil market.
Traders also listened to rumors that the Iran nuclear talks were making some progress, and that would enhance the global crude supplies and depress the prices.
Turning to the geopolitical front, bears are relishing in the hopes that Iran may provide around 1 million to 2 million barrels daily in extra oil supply if a deal is sealed.
The oil price is seemingly in a massive sea of chop between a widespread sideways range, also known as the ”Barroom Brawl Zone”. Notably, the price action is volatile, random, and breakout traders are seeking the breach of either side of the current channel. For now, WTI has fallen on the day and appears to be testing critical support areas.
Nonetheless, there might be a considerable opportunity within the channel on the basis that the price action seems to have left a major wick on the downside in a 50% mean reversion.
The opportunities available are evident in the 15-min charts with the oil price being resisted near a 61.8% Fibo of the 15-min price drop’s range. If the prices manage to break the current support, on a retest of the market structure, the price might be at a discount.
The possibilities will shift to favor the bulls as a downside retest of the daily channel’s support levels is expected to hold. On the 4-hour charts, the price has melted to the downside. However, it is yet to convincingly break the support zone. Where does the oil market go next? Various factors might come into play in the future to determine what will trigger the next price action.