FxWirePro: Beware bullish engulfing in WTI after eight days of decline

North American benchmark, WTI has been declining for eight consecutive days, before posting a major engulfing candle yesterday as tensions and fighting in Middle East edged up after France joined bombing raid in response to Friday's attack by ISIS, in Capital Paris, which left more than 120 dead and 350 injured.

The oil wells in the region involved (parts of Syria and Iraq) are already controlled by ISIS and unlikely to cause any major disruption to an already oversupplied market. So scope of supply shock is limited, which means bears are likely to keep rampaging oil, unless serious disruptions take place in the Middle East.

Nevertheless, there is a sentimental factored involved over increased fighting in an area, which is a source of world's 30% crude oil.

Moreover, sentiments were extremely one sided as crude declined for eight consecutive days leading to almost 15% decline in price.

Even though, supply glut remains quite large and price might decline further, it is important to recognize that correction might be lager over profit booking, if crude moves higher above yesterday's high around $42.2/barrel and bullish engulfing indicating decline in downside momentum.

WTI is currently trading at $41.6/barrel.