August crude oil prices are showing sharp reversal action to the upside this morning, helped by a rebound in global equity markets and more than 1.0% decline in the USD. Risk assets across the globe have embraced an agreement among EU leaders to help reduce borrowing costs in Spain and Italy, and that has fostered ideas that global oil demand could turn higher. It has also triggered an aggressive short-covering rally this morning. August crude oil prices experienced a late day slide yesterday to the lowest close since May 2010. In addition to easing concerns over the European debt debacle, the crude oil market has also drafted support from tightening North Sea supply concerns. The market seemed to overlook reports late Thursday of a greater than expected amount of lost output from the oil worker strike in Norway. The crude oil market also appears concerned that the supply situation could tighten further as the European embargo on Iranian oil takes hold this weekend. The price action Thursday was very weak and went deeper than expected. However, bullish reversal action this morning favors a retest of gap resistance at $81.20-$81.45. Support in August crude oil comes in this morning at $79.05.
CRUDE OIL (AUG): A crossover down in the daily stochastics is a bearish signal. Daily stochastics are trending lower but have declined into oversold territory. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market’s close below the 1st swing support number suggests a moderately negative setup for today. The next downside objective is now at 75.18. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 80.19 and 82.29, while 1st support hits today at 76.63 and below there at 75.18.
StockMarketNews Research Team