Oil continues to find it hard work, building on the bullish breakout of mid June, having moved into a sustained phase of price congestion over the last few weeks, as it continues to slide lower ahead of today’s oil inventories report. This initial weakness was first signalled following the wide spread up candle and high volume of the 12th June, which saw the commodity break out from congestion in the $102 to $104 per barrel region and close the day at $106.03 on solid volume, and validating the move higher. The two subsequent days of trading then added a cautionary note to the price action, with above average volume failing to move the market higher and ending with two shooting star candles, with the commodity duly sliding lower and building a base of support in the $105 per barrel region.

This level has since been tested on several occasions, with the two isolated pivots lows clearly marking this level, with the volume at price histogram also defining this further. The weakness at this level was then confirmed once more with the candle of the 25th June, coupled with the pivot high and above average volume once again. Since then, the WTI contract has moved lower, and is now testing this support level once again, with yesterday’s long legged doji candle failing to reverse sentiment.

The forecast for this afternoon’s inventory is for a draw of 2.2m bbls, and if this is close to target, then oil may find some much needed support. Should the inventory figures at Cushing show a build or miss the forecast, then expect to see further selling pressure for the commodity, with the next logical target being the developed platform below at the $103.50 per barrel level.

In addition, and with tensions around the world now easing, much of the knee jerk reaction for oil prices is now ebbing away and reflected in the current drift lower.

Equity only readers can gain exposure to WTI Crude Oil through the United States Oil Fund (USO, quote) ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The USO will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas (UNG, quote) and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

Anna Coulling is a trader with over 16 years’ experience and founder of AnnaCoulling.com