Oil Eyes New Levels from Critical Zone

U.S. crude oil prices dropped nearly 3% on Thursday after reports surfaced that Saudi Arabia plans to increase oil production later this year. The Financial Times reports that Saudi Arabia is willing to abandon its informal target of $100 per barrel, even if it means oil prices could stay low for an extended period. As a result, West Texas Intermediate (WTI) crude for November fell to $68.15 per barrel, down 2.21%, while Brent crude slipped 2.2% to $71.86 per barrel. Gasoline prices also dropped, with the October RBOB gasoline contract falling 1.7% to $1.964 per gallon. In contrast, natural gas prices rose slightly by 0.3% to $2.628 per thousand cubic feet. Oil production could increase further in Libya after a deal was reached to appoint a new central bank governor, ending recent disruptions. Additionally, weak demand from China, the world's top crude importer, continues to put downward pressure on oil prices, despite an earlier rally this week after Beijing announced a new economic stimulus plan.

XBRUSD – H4 Timeframe

The horizontal lines on the 4-hour timeframe chart of Brent represents the Daily timeframe pivots. A close examination reveals that the previous low and high that was formed within the zone have bought been broken. This means that we can expect a reaction from the highlighted demand zone based on the confluence from the Fibonacci retracement levels, the daily timeframe pivot, the drop-base-rally demand, and finally, the SBR price action pattern formed by the break below and above the previous low and high respectively.

Analyst’s Expectations: 

Direction: Bearish

Target: 76.30

Invalidation: 68.50

XTIUSD – H4 Timeframe

The price action on the 4-hour timeframe of XTIUSD is closely similar to what we saw on the Brent chart above. Here on the XTIUSD chart, we can see the SBR pattern right within the daily timeframe pivot. The Fibonacci retracement level, and the demand zone can be considered the final confluences in favor of a bullish sentiment.

Analyst’s Expectations: 

Direction: Bearish

Target: 72.70

Invalidation: 64.20

CONCLUSION

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