The sell-off in crude oil continued on Wednesday with front-month WTI breaking below $70 to hit its lowest level in over five months. That took the losses from the September high to 26% - pushing even further into unofficial ‘correction’ territory. The losses came even after US inventory data showed a bigger-than-expected drawdown which should have offered some support. But despite this, inventories remain elevated, and fears continue to grow over the negative outlook for future demand. Even the 2.2 million barrels per day OPEC+ production cut promise failed to offset selling pressure. But we’re seeing a bit of a bounce this morning and it’s possible that we may see prices reverse direction if they can consolidate above $70 for a bit. But it’s worth noting that support comes in a wide band from $70 to $67.50. So there’s still the possibility of more downside, even assuming that the lower end of support holds.
As can be seen on the 4-hour chart above, the MACD has dropped back below the upwardly sloping trendline and is approaching oversold levels. But markets can remain oversold, or overbought, for long periods before correcting.