Though the oil prices surged this morning after the US crude oil drop in stockpiles, investors are worried about OPEC-led production cuts, as they are unlikely to be able to halt a 3-year oversupply.

As per the recent update from the EIA (Energy Information Administration), the crude oil inventories showed a draw of 2.45 million barrels this week. The figure was predated by a draw of 1.66 million barrels last week. Surprisingly, the draw was even more than the predicted approximate of around 2.0 million barrels.

The market dropped heavily in response to the unease surrounding the probability that nearly 10% of Chinese refineries may shutdown during the third quarter of 2017 for maintenance purposes. The news undermined the demand from the second-biggest consumer of crude oil.  

Forex Trading Signal – Idea

The idea is to wait for an appropriate trading level. I recommend taking a sell position below $42.95 with a stop loss below $43.35 and take profit of $42.10.

WTI Crude Oil – Daily Chart – Double Bottom Pattern

Technical Outlook – Intraday

At this point, the crude oil is holding right above a double bottom support level, which can only be seen on the daily timeframe. Last year on Dec 14, the crude oil placed a low of $42.18 while oil tested the same level yesterday in the US trading session.

The double bottom pattern often reverses the market. Therefore, if the market stays above $42, there is a high chance of a reversal in the energy instrument. Otherwise, the market is likely to test $41.15 & even $39.60.