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The daily chart for the WTI oil futures for September continues to reflect the ongoing struggle for oil prices which have remained waterlogged and rangebound as they struggle to break the $42 per barrel region. And whilst last week’s price action was marginally above that of the prior week, there is little indication this commodity is likely to develop a bullish trend higher in the short term and indeed there are several reasons to suggest this is unlikely.

From a fundamental perspective, the issue is one of oversupply coupled with a lack of demand owing to the pandemic and it’s not hard to see why at a basic level, with local and international travel virtually at a standstill, and with the threat of a second virus wave we move into winter, is unlikely to improve the current situation. For the US the annual driving season would normally be at its peak at this time of year thereby resulting in an increase in demand.  However, last week's unexpected build in oil inventories of 4.72m bbls surprised the markets which had been expecting a draw with -2.1m bbls. The logical step now would be for OPEC to coordinate a cut in supply but this is unlikely given the inability of member states to any such agreement.

Moving to the technical picture, as we can see on the chart we have resistance building in the $42 per barrel region, an area that was tested last week but repelled on each occasion, with the rising volume on Tuesday last failing to punch through this level. In summary, we are likely to see a continuation of the current price action at least until the supply and demand issue is addressed.