WTI crude oil futures (NYMEX: CL) staged a partial rebound after early losses on Thursday, fuelled by escalating geopolitical tensions likely causing supply disruptions and bullish demand forecasts. Houthi rebels continue their Red Sea threats while escalating tensions between Iran and its neighbours keep the Middle East on edge. Production outages at Libyan and Azeri fields further tighten supply. While unexpected US crude inventory gains were reported, extreme cold weather led to a significant fall in oil output in North Dakota.
However, the demand picture isn’t entirely rosy. The IEA revised its 2024 global oil demand growth forecast upwards, but it still represents a significant slowdown from 2023. Macroeconomic headwinds, stricter efficiency standards, and a growing electric vehicle fleet are casting long shadows. OPEC, however, maintains a bullish outlook, expecting demand to exceed supply growth in 2025, leading to a tight market.
Technical
The 4-hour chart shows that crude futures trade at $72.66/BBL, having recently crossed above key SMAs but facing stiff resistance from a supply zone and dynamic resistance above. Recent break above the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line) suggests bullish momentum, but falling volume and a downward-sloping RSI (52.02) hint at weakening confidence.
Short-term trading opportunities towards the $71.69/BLL support could exist should the supply zone hold and a reversal materialize. A break below the $71.69/BLL level would likely bring the $70.53/BLL support level within the bears’ reach in the short term.
However, a break back to the ascending triangle would leave the triangle’s resistance at $74.05/BLL firmly in sight of the bears. A break above the initial resistance, at significant volume, could confirm the bullish momentum, likely bringing the $75.25/BLL support level into play.
Summary
WTI’s rebound hinges on overcoming near-term resistance and maintaining momentum despite weakening technical indicators. Supply risks and bullish demand forecasts offer tailwinds, but a bearish reversal could push prices towards $71.69/BLL, with a sustained push higher likely to target the $74.05/BLL resistance level.
Sources: TradingView, EIA, OPEC+, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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