On Thursday, the price of crude oil declined, giving back the bulk of the previous session's gains, as Libyan oil production increased and tensions over Iran eased. 

Libya's crude oil production has recovered to 620,000 barrels per day, compared with its pre-war capacity of 1.6 million bpd, as major western fields ramped up output after protesters agreed to reopen them. At this point it’s worth mentioning that output had collapsed to below 200,000 bpd in a stalemate between protesters and the government that lasted more than a month.

And what about Iran? Iranian President Hassan Rouhani said his country was not seeking war and would never seek to develop a nuclear weapon and the White House said leaders from both countries may meet next week. At this point, it’s worth noting that western sanctions on Iran's nuclear program have sharply reduced Tehran's oil revenues. They also have been creating concerns that supplies from other producers nearby could be impacted.

What impact did these events have on crude oil’s chart? 

Although light crude increased sharply to over $108 on Wednesday, yesterday it gave back the bulk of the previous session's gains and declined to slightly above $106 per barrel. With this move, crude oil came back below the previously-broken the 50-day moving average, however, the breakdown is not confirmed at the moment. 

Please note that slightly below this moving average there is another strong support - the rising support line based on the August lows, which stopped oil bears on September 3 and it did it once again earlier this week. 

At this point, it’s also worth mentioning that in spite of the yesterday’s decline, a bullish morning star candlestick pattern, which reinforced the above mentioned rising support line, was not invalidated.

As we wrote in our previous Oil Trading Alert, there is a triangle on the daily chart. Although, the price of light crude increased above the upper line of this triangle, buyers didn’t even manage to push it above $109. This weakness encouraged oil bears to go short and light crude came back to the triangle range. If the rising support line based on the August lows holds, we may see another attempt to move higher.

To summarize: Although crude oil lost almost $6 since the September 6, the entire recent decline was smaller than the downward move from the August 28 top to the September 3 low (in that time light crude lost slightly above $8). Additionally, the August-September decline is still similar to the previous ones: from the July 19 top to the August 8 low and from the June 19 top to the June 24 low. From this perspective the uptrend is not threatened.

Long-term outlook: bullish.

Medium-term outlook: somewhat mixed, but with a bullish bias. 

Short-term outlook: still bullish. As long as all corrective moves since June are similar, the uptrend is not threatened. 

Trading position (short-term): If crude oil climbs above the September 12 top and the breakout will be confirmed, we suggest opening long positions. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.

Thank you,
Nadia Simmons