New York-traded crude will probably extend a drop after a ‘Shooting Star’ chart pattern Wednesday signalled the end of a seven-week rally.

The ‘Shooting Star’ is formed when prices rise and then fall back during the same day, ending near the same level as they started.

West Texas Intermediate oil for June delivery opened at $US60.72 a barrel and rose as high as $US62.58 before closing at $US60.93 on the New York Mercantile Exchange Wednesday. The session low was $US60.54. Futures fell $US1.99, or 3.3 per cent, to end Thursday’s session at $US58.94.

“WTI was the only market that hadn’t reached its seasonal objective, which was $US61.88,” Brian LaRose, technical strategist for broker United-ICAP in Jersey City, New Jersey, said by phone. “The bulls made an attempt to get through this level but they met with a swift failure.”

“To signal the end of this advance and confirm Wednesday’s candlestick as a peaking pattern, bears need more than a down day,” LaRose said. They need prices to fall below $US57.73, he said.

The $US57.73 a barrel coincides with a 23.6 per cent retreat of the rally from an intraday low of $US42.03 on March 18 to $US62.58 on Wednesday, referred to by technical analysts as a Fibonacci retracement.

Stronger-than-expected demand growth and a slowdown in US crude supply have boosted oil prices by 50 per cent from a six-year low hit in January.

Physical markets, however, are showing weakness, crude traders said, pointing to tens of millions of West African, Azeri and North Sea barrels struggling to find buyers.

US crude inventories fell almost 4 million barrels last week, their first weekly decline since January, government data showed on Wednesday. But crude stockpiles still stood at a discouragingly-high 487 million barrels. While weekly demand for gasoline was higher, stocks of the fuel also rose despite the approach of the peak US driving season.

“There is some disappointment out there that the fundamentals for gasoline and oil products aren’t improving as quickly as some people would like, to provide support for the broader rally in crude that we’ve been seeing,” said Carl Larry, director of business Development for oil and gas at Frost & Sullivan.

The world’s biggest crude exporters, grouping in Vienna next month for a meeting of the Organisation of the Petroleum Exporting Countries, are unlikely to cut output, a delegate said.

Extracted in full from Financial Review.