In the past year, the price of crude oil has surged by more than 50%. In June, the price bottomed at $42 a barrel and then started a rally that saw it reach a three-year high of $66 last month.
This week however, the rally seems to have ended with the price of WTI falling to a monthly low of $61.14.
The fall is associated with the continued growth of crude mining in the United States. Reports from the Energy Information Administration (EIA) shows that the pace of growth in the US mining is faster than expected. As you recall, the same agency announced last month that the US will pass Saudi Arabia and Russia in crude oil volumes by the end of the year.
A report released by the EIA showed that the crude inventories went up by 1.9 million barrels to 420.3M last week. That was lower than what analysts were expecting. However, another data from API showed a decline of 1.1 million barrels.
To oil bears, the drop in crude oil, based on the US production is a valid move. To bulls however, a move from the highs was expected.
In the short term, the WTI crude oil is oversold and could see a retracement to the $62.50 level which could extend to the $63.50 level.
An alternative scenario is where bears have the day, which may see the price drop to the $60 level.