WTI Crude Oil: Risk to 55 area lows

WTI Crude Oil's bearish flag targets the April-May lows at 55.30-55.12

Our technical view has tilted bearish on WTI Crude Oil futures given weak trends on both the daily and weekly charts. However, choppiness in crude oil has wreaked havoc on these tactical chart setups. After stalling a declining 26- and 40-day moving averages earlier this month, crude oil broke lower from an early October bearish flag to target the April and May lows at 55.30-55.12. The immediate pattern stays bearish below 60.17-60.40. The declining 26- and 40-day moving averages at 62.43-62.85 could also continue to provide an overhang.

WTI Crude Oil has big seasonality risk in October and November

Adding to downside pressure, seasonality trends are unfavorable—October and November have historically been the two weakest months of the year for crude oil, posting average monthly returns of -2.20% and -2.97%, respectively, since 1986.

In summary, these technical and seasonal factors suggest elevated risk for further weakness for WTI Crude Oil futures in the near term.

Chart 1: WTI Crude Oil Futures

Chart 2: WTI Crude Oil Futures monthly average returns