The signs are not looking good
WTI crude is trading down by more than 8% in July so far, with yesterday's drop taking out the $70 handle. The fall stalled just around the 61.8 retracement level @ $68.05 but the downside move appears to be continuing today - with the 100-day MA (red line) @ $67.07 eyed next by sellers.
After the squeeze higher following the OPEC+ agreement at the end of June, supply worries are starting to creep back in and it looks like we're nearing a tipping point for oil as we head towards the second half of the year - where oil has traditionally struggled.
The move lower yesterday saw a key technical break in Brent crude as well:
The upwards sloping trendline stretching all the way back to June last year is now broken, and from a technical perspective that isn't pretty at all.
Indirectly, the drive lower in Brent also drives WTI lower as well. Not to mention that the seasonal pattern heading into the second half of the year has more often than not worked against oil bulls:
The period between August to October tends to be the worst months if you take into account the past 15 years while July actually has a trailing average of +0.69% if you consider a 15 years historical snapshot instead of 10 years.
Either way, there is a correlation that oil tends to be softer as we head into the latter stages of Q3 so it is something to be wary about - even if you don't believe in seasonal patterns, it's always good to have it around just in case you need to pull it out of your back pocket.
Among all of this, I'd be watching that break in Brent very closely because that typically isn't a very good signal of confidence by those bullish on oil prices.
If that is any signal (along with seasonal patterns), it points to the notion that we are likely to see more pain to come with regards to oil prices in the coming months.
