Crude oil futures ended at $66.52, down $0.46 or -0.69%. During the trading day, prices reached a high of $67.10 and a low of $66.25. The peak price faced resistance under a broken trendline, hinting at a bearish trend. The next key target on the downside is the 61.8% retracement level at $66.13, calculated from movements between the June low and the July high. If prices drop below this level, the focus will shift to the July 7 swing low at $65.51.

Technical Analysis Breakdown

We’re noticing the same technical breakdown and it’s not surprising. The failure to reclaim the broken trendline indicates the path of least resistance is downward, as the market is reacting to overhead supply. The immediate target is just above the key retracement level at $66. The underlying fundamentals suggest this might lead to a larger move. This isn’t just a pattern on the chart; it shows a real change in the balance of supply and demand. First, let’s explore the demand side, where weaknesses are clear. Attention is focused on China, and the data is worrying. Their manufacturing PMI is barely showing growth, with recent figures just above 50, the line between expansion and contraction. The post-COVID recovery is not as strong as many expected; it’s struggling due to an ongoing property crisis, which is hurting demand for industrial fuels and energy. On the supply side, things look increasingly bearish. While OPEC+ is sticking to its production cuts, the U.S. is nearly offsetting this effort alone. American crude production has hit a record high, surpassing 13.3 million barrels per day. Recent EIA reports back this up. This isn’t a minor increase; it’s a significant surplus that will pressure the market for months. Historically, when U.S. shale production rises against weak global demand, prices tend to drop. We saw this from 2014 to 2016, resulting in tough times for bulls.

Trading Strategies and Market Outlook

With this context, we think traders should prepare for further declines. Moving below the $66.13 level seems more likely now. For those trading derivatives, this is an excellent chance to take a bearish position with defined risk. Consider buying put spreads, like buying a near-month $65 put while selling a $62.50 put. This strategy reduces upfront costs and limits maximum risk while providing substantial profit potential if prices drop below the analyst’s support level of $65.51 and approach the low $60s. The rising U.S. supply coupled with weakening demand from China creates a fundamental pressure, and the technical indicators are just beginning to show the effects. Create your live VT Markets account and start trading now.

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