The WTI Crude Oil Futures (NYMEX: CL) have been a focal point in the global commodity markets, experiencing a modest 6% gain year-to-date.
Supply-side dynamics have largely supported prices. Tensions in the Middle East influencing supply dynamics and OPEC+ commitments to cut output by 1.0 million barrels per day until June 2024, have contributed to market buoyancy.
However, demand-side uncertainties have hindered further upside potential. Oil prices have oscillated between $70 and $80 per barrel this year, influenced by increased U.S. supply and subdued demand prospects in China. Concerns over hotter-than-expected U.S. inflation, delaying Federal Reserve interest rate cuts have dampened global fuel demand prospects, weighing on oil futures. Moreover, weak Chinese demand and apprehensions regarding its slowdown in economic growth have exacerbated downward pressures. The persistent buildup of crude oil inventory reported by the U.S. Energy Information Administration over the past four weeks underscores weakened demand dynamics, potentially intensifying the bearish sentiment in the oil futures market.
Technical
The WTI Crude Oil Futures have staged a recovery after a downturn in late 2023, displaying signs of bullishness in the current market structure.
Trading within an ascending channel pattern and converging with the 100-day moving average, the oil futures initiated an upswing from the $71.41 per barrel level, establishing support at the lower boundary of the ascending channel. Despite reaching $78.92 per barrel, downside pressures halted further gains, resulting in a downturn to the 38.20% Fibonacci Retracement level.
A breakdown below this level, accompanied by high volume, may signal increased selling pressure, potentially leading to a decline to the 50% level. Conversely, if the 38.20% level holds as intermediate support, a retest of the $78.92 per barrel level is plausible, contingent upon sustained bullish momentum.
Summary
The WTI Crude Oil Futures face demand uncertainties amid geopolitical tensions and supply cuts. The prices oscillate between $70 and $80 per barrel, influenced by U.S. supply growth and Chinese demand concerns. A breach below the 38.20% Fibonacci level may signal downside pressure, while a hold could open the door to a retest of the $78.92 per barrel level.
Sources: EIA, Reuters, Dow Jones Newswires, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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