Crude oil, declining since touching a one-year high of $82 a barrel Oct. 21, is poised to test the bottom of a downtrend channel below $74, according to an analysis of price charts by Societe Generale SA.

Oil, trading lower today for the fourth day in five, could extend its
drop as traders pull out in the absence of profit opportunities,
according to Stephanie Aymes, a London-based commodity technical
analyst at France’s second-largest bank by market value.

“We are in a range, a descending channel,” Aymes said in an e-mail. “It
looks like the one in August, but that was deeper. This range is very
long and the daily indicators are breaking supports.”

Crude oil has pared its gains for this year from as high as 84 percent
to 70 percent amid concern weaker growth in the U.S., the world’s
largest energy consumer, may slow the recovery in demand. Futures for
January delivery on the New York Mercantile Exchange was at $76.01 a
barrel in electronic trading, down 1 cent, at 11:57 a.m. Singapore
time.

Prices, which fell yesterday after the Commerce Department said the
U.S. economy expanded less than estimated in the third quarter, are
approaching a technical support area and may soon test its resilience,
Aymes said.

The current “consolidation” phase will proceed to the bottom of the
channel near $74 a barrel, or as low as $72.50 to $73, she said in a
separate note to clients. The top of the channel is around $80.10 to
$80.60 a barrel.

Further, oil’s 14-day Relative Strength Index mirrors the price
downtrend, she noted. Today’s reading about 45 is close to neither the
buy or sell markers at 30 and 70, suggesting the market probably isn’t
due for a change in direction.

Source: Bloomberg

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