The previous session had seen price rises for both the United States West Texas Intermediate benchmark and international bellwether Brent. A suspected Ukrainian drone attack on a Baltic Sea processing terminal owned by Russian natural gas giant Novatek was behind part of that move. News that US and United Kingdom forces had again launched airstrikes against Houthi rebels in Yemen overnight added some early support to prices but that has faded as the session has progressed. Away from global conflicts and their immediate effects on production, the market is still worried about a fundamentally oversupplied market meeting economic outlooks uncertain at best. China remains a particular concern given its tepid economic recovery and cratering consumer confidence. Beijing has announced a raft of measures aimed at propping up demand but has so far failed to produce the sort of ‘big bazooka’ that would overwhelm energy traders’ doubts. The market will get some inventory snapshots out of the US this week. The American Petroleum Institute’s crude oil stock roundup is due after the European markets close on Tuesday It’s expected to show a drawdown of three million barrels in the week of January 19 and might support at least US prices if so. The Energy Information Authorities' broader look at petroleum product stockpiles is coming up on Wednesday and will likely attract more market attention. The typical lower high/higher low pattern of a pennant formation remains in place on the chart. This should give bulls some pause as, typically a continuation pattern, the pennant ought to suggest a further leg lower once it resolves itself. However, the market has shown little interest in breaking conclusively to the downside over the past three weeks, since its break above the most recent downtrend band. It might perhaps be better to think of current action as a broad range trade between December 26’s significant intraday peak of $76.17/barrel and January 3’s low of $68.99, with near-term direction likely decided by which of those breaks first. On an upside move bulls will eye resistance at the peaks of late November, in the $77.50 area. December 13’s six-month low of $67.73 will beckon as support on a fall below that lower boundary. Sentiment toward US crude at current levels is extremely bullish according to data from IG Group. That finds the market long to the tune of a remarkable 76%. While this looks positive at face value, it also looks more than a little overdone and may mean contrarian short plays offer reward image widget
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