U.S. West Texas Intermediate crude oil futures are trading sharply higher late Thursday after posting a dramatic closing price reversal bottom after U.S. government data showed a much bigger drop than expected in crude and gasoline inventories.

The early selling pressure was fueled by worries that global crude supplies might swell following the collapse on Monday of negotiations between the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+. The U.S. futures contract hit its lowest level in about three weeks.

At 20:37 GMT, September WTI crude oil is trading $72.46, up $0.96 or +1.34%. This is up from an intraday low of $70.10.

In other news, U.S. crude inventories fell by 6.9 million barrels last week to 445.5 million barrels, Energy Information Administration data showed. Analysts had expected a 4 million-barrel drop. Gasoline stocks fell by 6.1 million barrels in the week to 235.5 million barrels, the EIA said. Analysts had forecast a 2.2 million-barrel drop.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the closing price reversal bottom may be signaling a shift in momentum to the upside.

A trade through $70.10 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend will change to up on a trade through $76.07.

The short-term range is $61.06 to $76.07. Its retracement zone at $68.57 to $66.79 is the major support. This area is controlling the near-term direction of the market.

The first minor range is $64.60 to $76.07. Its 50% level at $70.33 was tested successfully on Thursday.

Another minor range is $67.84 to $76.07. The market is currently trading on the strong side of its 50% level at $71.96, making it support.

The next minor range is $76.07 to $70.10. Its 50% level at $73.08 is the next upside target.

Short-Term Forecast

The direction of the September WTI crude oil futures contract early in the session on Friday is likely to be determined by trader reaction to $71.96.

Story continuesBullish Scenario

A sustained move over $71.96 will indicate the presence of buyers. The next target is $73.08. Traders should watch for sellers on the first test of this level. They will be trying to produce a potentially bearish secondary lower top.

Taking out $73.08 could generate the upside momentum needed to challenge $76.07.

Bearish Scenario

A sustained move under $71.96 will signal the presence of sellers. If this move generates enough downside momentum then look for a retest of $70.33, followed by $70.10. The latter is a potential trigger point for an acceleration to the downside with $68.57 – $66.79 the primary downside target area.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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