The WTI Crude Oil Futures (NYMEX: CL) have seen a modest uptick in 2024, propelled by mounting concerns over supply dynamics.
This trend gained momentum last week amid escalating tensions in the Middle East, Red Sea shipping route disruptions, and protests causing oilfield disruptions in Libya, raising supply-side apprehensions. Furthermore, a significant boost to oil prices emerged from the U.S. Energy Information Administration’s report, unveiling a notable 5.5 million barrel drop in crude inventories, signalling robust demand exceeding forecasts.
However, this recent ascent encountered headwinds as Saudi Arabia slashed prices for its Arab Light crude to Asian customers, signalling potential demand shifts. The forthcoming focus centres on U.S. inflation data, which is pivotal for assessing possible shifts in Federal Reserve interest rate policies. A foreseen inflation surge might exert downward pressures on oil futures, aligned with higher interest rates impacting economic growth and oil demand.
Technical
The WTI Crude Oil Futures recently navigated a downward trend, trading below the 100-day moving average within a descending channel pattern, signalling a bearish market stance.
However, a notable shift in sentiment spurred a rebound, finding crucial support at $67.71 per barrel at the channel’s lower boundary, coinciding with oversold RSI conditions. This prompted an upward surge toward the channel’s upper boundary, stalling at $76.18 amid overbought RSI levels, marking a resistance point.
Subsequently, a downturn led to a retracement, but the oil futures found support at the 61.80% Fibonacci Retracement Golden Ratio, initiating a reversal as bullish traders piled into the market. Despite attempts to break above the channel’s upper boundary, downside momentum prevailed, leading to a downturn. This downturn could potentially see a retest of the Golden Ratio if a high volume breakdown below the 50% level ensues. Conversely, bullish trends might find resistance at the channel’s upper boundary.
Summary
The WTI Crude Oil Futures witnessed an initial surge, fuelled by supply concerns and robust demand signals, but encountered setbacks due to Saudi Arabia’s pricing shifts, hinting at potential demand side concerns. Technically, despite attempts to rally, the market struggled within a descending channel pattern, indicating bearish sentiment. At present, the 50% level will likely serve as a pivotal point of interest in the price action.
Sources: U.S. Energy Information Administration, Dow Jones Newswires, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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