Crude Oil has been bearish since June last year, as central banks picked up the pace of rate hikes, particularly the FED, which meant that the US and global economies would be heading into a recession. Although US WTI crude has formed a support zone above $70 which is holding and during most of January Oil turned bullish as the sentiment improved on slowing US consumer inflation, which meant that the FED would slow down.

The FED did slow down and Powell mentioned rate cuts toward the end of the year in the last FOMC meeting last Wednesday, but left the policy to the data and on Friday we saw some really strong numbers from the US. Services activity bounced in January while employment surged, which turned the USD bullish.

But, this means that the US economy is recovering well and the demand for energy will increase, while China is also opening up. China is transitioning from zero-Covid to living with the coronavirus as the rest of the world is, which is also helping during the rebound we’re seeing in crude Oil.

US Oil Daily Chart – The 100 SMA Acting As Resistance

A bearish reversing pattern is forming

But, US WTI crude Oil has reached the 100 SMA (green) on the H4 chart, which is acting as resistance and the last two candlesticks have closed as dojis, which are bearish reversing signals after the bullish move that we have seen so far this week. Stochastic is also overbought, so we decided to open a sell Oil signal up here, hoping for a bearish reversal, especially after the buildup in EIA Oil inventories.

Weekly Oil EIA Crude Inventory Data

• Weekly crude oil inventories +2423K vs +2457K expected
• Prior was 4140K
• Gasoline +5000K vs +1271K exp
• Distillates +2900K vs +97K exp

The bearish inventory numbers continue to roll out.

US WTI Crude Oil Live Chart