The direction of the October WTI crude oil futures contract on Friday is likely to be determined by trader reaction to the 50% level at $42.01.
U.S. West Texas Intermediate crude oil futures are edging lower early Friday and are currently on track to post a modest gain for the week amid a Reuters report calling for overproducers to rein in supply.
Reuters reported that OPEC+ found some members would need to slash output by 2.31 million barrels per day to offset their recent overproduction. The OPEC members accused of overproducing are Iraq, Nigeria and the United Arab Emirates.
At 09:37 GMT, October WTI crude oil is trading $42.52, down $0.30 or -0.70%.
Meanwhile, OPEC+ members also flagged demand risks that could drive demand down to around 9.1 million bpd. However, the demand situation could worsen if the coronavirus pandemic continues to worsen.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum has stalled for more than two weeks.
A trade through $43.68 will signal a resumption of the uptrend. The main trend will change to down on a trade through the last main bottom at $39.00.
The minor trend is also up. A move through $41.33 will change the minor trend to down. This will officially shift momentum to the downside.
The major resistance area is a long-term 50% to 61.8% retracement zone at $42.01 to $46.43. The market has been trying to establish a support base at $42.01 for weeks. This is actually helping to support the slight upside bias.
The minor range is $39.00 to $43.68. Its 50% level at $41.34 is support. This combines with the minor bottom at $41.33 to form a support cluster.
Daily Swing Chart Technical Forecast
Based on the early trade and the near-term price action, the direction of the October WTI crude oil futures contract on Friday is likely to be determined by trader reaction to the 50% level at $42.01.
A sustained move over $42.01 will indicate the presence of buyers. If this creates enough upside momentum then look for aggressive buyers to try to trigger upside breakout over $43.29 and $43.68.
A sustained move under $42.01 will signal the presence of sellers, but don’t expect an acceleration to the downside unless the selling is strong enough to take out $41.33.