WTI Crude Oil prices (NYMEX: CL) are extending their seven-week decline, pressured by concerns about a global economic slowdown and ample production. Despite OPEC+ cuts, oversupply fears continue to dominate the market, pushing prices down towards five-month lows.
The bleak economic outlook in major economies, particularly China and Europe, is dampening oil demand expectations. This, coupled with high output from non-OPEC+ nations like the United States, creates a scenario of oversupply that weighs heavily on prices.
While the recent announcement by the US government to refill its Strategic Petroleum Reserve offered some support, it wasn’t enough to offset the broader bearish sentiment. Concerns about the effectiveness of OPEC+ cuts in a global economic slowdown further exacerbate the downward pressure on prices.
Technical Analysis
The 4-hour chart shows that the WTI crude oil trades below key downward-sloping moving averages, suggesting a potential extension of the downtrend. However, a rising RSI hints at the possibility of short-term reversals.
Short-term trading opportunities could exist towards the support level at the $70.39/BLL price level should the bears sustain a push lower. A break below the initial support could confirm the bearish momentum, likely bringing the $69.55/BLL and $68.81/BLL support levels into play.
However, short-term trading opportunities could arise towards the initial resistance at $71.78/BLL should the bulls sustain a push higher. A break above the $71.78/BLL level would likely bring the $72.82/BLL resistance level into play in the short term.
Summary
Looking forward, the trajectory of WTI Crude will depend on a delicate balance of factors, including global economic growth, OPEC+ production decisions, and the ongoing geopolitical landscape. While the short-term outlook appears bearish, longer-term prospects remain uncertain.
Sources: TradingView, Trading Economics, EIA, OPEC+, Bloomberg, The Business Times.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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