Crude oil prices (West Texas Intermediate) have reverted into their old price range of $50.63 and $58.94 as the markets are projecting that tensions between the US and Iran will be less as President Trump fired his national security adviser John Bolton.
According to online reports, there have been many sticking points between President Trump and the Hawk, Mr. Bolton, such as how to deal with Iran, the Taliban, and North Korea. Bolton has been advocating a firmer stance, while the US President has been said to be ready to negotiate, and being more flexible. On the news of the firing of Bolton crude oil prices declined.
US Crude oil and petroleum inventories have been ticking up since 2018 when WTI crude oil prices rallied to a high of 76.84 dollars per barrel and are now back at levels seen in 2017 when the crude oil price was trading between 42 to 55 dollars per barrel. The ample amount of stocks should cap prices. However, we have started to see some small changes in the last two weeks with inventories declining below the July low, and if we see sharp drops in the weeks ahead it could change the mood of crude oil speculators.
Technically, the crude oil prices are trading sideways between the June low of $50.63, and the July 31 high of $59. The difference between these two levels is 8.37 dollars, and on a break to 50.63, the price could slide by 8.37 dollars and reach 42.26, while a break to 59, could send prices to $67.37.
The prices are also converging between a downward sloping trendline and an upward sloping trendline as seen in the chart below. The trendlines form a triangle, and a breakout, e.g., a push above the downward sloping trendline, or a break to the upward sloping trendline, could generate a 15 dollars move from the point of the break to the trendline.
However, the triangle pattern itself is unpredictable to use in trading as it is easy to get a false breakout. However, combining the trendline with horizontal levels mentioned above should improve the reliability of the pattern. Therefore, a break to the July 31 high or June low could mark the actual break to the triangle. If the move is coupled with changes in crude oil stocks, or geopolitical news then than will strengthen the price signal.