Oil ended the past week down 4.4%, despite a brave rally on Friday that resulted in oil closing the week at just over $71 per barrel. Wednesday marked the brunt of the downward price action, with oil prices closing nearly 5% lower for the day after Libya indicated that it would resume export activities at its Eastern ports, helping allay fears over tight global supplies.

Working against the downward price pressure was news that U.S. stocks of crude oil declined by 12.633 million barrels in the week ended July 6, 2018, following a 1.245 million rise in the previous week. It is the most significant drop in crude inventories since the week ended Sept. 2, 2016. The sharp decline in the level of inventories came as a shock to oil traders and analysts who had forecast a drop of 4.489 million barrels.

Despite the appearance of strong oil demand from the larger-than-expected inventory draw, concerns about a growing trade dispute between China and the U.S. related to a 10% tariff on $200 billion worth of Chinese goods plus an end to oil supply disruptions in Libya took precedence in the market and pushed oil lower for the week.

Near-term price momentum also seems to be working against oil, with the Fast line of the moving average convergence divergence (MACD) indicator crossing below the slow line on the daily price chart. The cross is an early indication that the previous upward price momentum is slowing. The signal is typically confirmed when the fast line crosses the zero line on the MACD chart, indicating that momentum has shifted to the downside. For the time being, oil found some support at the 55-day exponential moving average of $69.06 per barrel and ended the week above the psychological price level of $70.

Where Are Oil Prices Heading?

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