Crude Oil Outlook: WTI Holds Support as Brent Shows Strength

WTI and Brent crude oil are showing signs that the recent pullback may be losing momentum. WTI is holding above support despite a sharp rise in speculative shorts, while Brent continues to display the stronger technical structure. With bearish momentum fading across both markets, the risk of a near-term rebound is building.

View related analysis:

Crude Oil Remains Elevated Despite Shorts Hitting Nine-Year High

Looking at market positioning shows that large speculators have pushed their gross-short exposure to a nine-year high. Despite this, they remain net-long by 109k contracts, while gross-longs have been creeping higher in recent weeks.

It is also interesting that WTI crude prices have not fallen much despite the rise in shorts. This could suggest traders are using these positions more as a hedge than a speculative bearish outlook.

Furthermore, a closer look at the weekly price action on the right-hand chart shows bearish momentum is waning. While the week is yet to close, it hints at a bullish hammer, while volatility has also been lower so far, suggesting bears may be running out of steam.

Source: NYMEX

WTI and Brent Crude Oil Futures Technical Outlook

It has been three weeks since oil prices peaked, and with bearish momentum waning and prices holding above support, I am on guard for a bounce. The loss of momentum has allowed a bullish divergence to form on the WTI daily chart (left). A bullish pinbar on Tuesday respected the 100-day EMA as support, and we’re yet to see a daily close beneath the August high.

Daily trading volume remains low, but the fact it stayed subdued during the decline suggests the bearish move lacked initiative selling. I now suspect quiet accumulation could be supporting prices.

Furthermore, the detrended price oscillator shows prices are 5% below the 20-day SMA – a similar distance to that which marked the August low.

Brent Crude Oil Trend Remains Stronger Than WTI

The trend on Brent crude oil (right) is arguably stronger than WTI’s. A prominent swing low formed on September 30 following a healthy pullback to the 50-day EMA. A bullish pinbar — and potential higher low — has since formed, showing demand above that swing low.

With the clues put together, bulls could be seeking dips within this week’s range in anticipation of the next leg higher.

Just how far crude can bounce will likely depend on headlines from the Middle East. But until the recent swing lows are broken, a bounce remains preferred.

Source: ICE, TradingView

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.