WTI Crude Oil (NYMEX: CL) prices experienced downward pressure amidst geopolitical developments and adjustments to Federal Reserve policy expectations. Optimism surrounding a potential ceasefire in the Israeli-Palestinian conflict and a stronger US dollar, which typically dampens demand for dollar-denominated commodities, pressured prices this week. Potential profit-taking after recent gains also contributed to the decline.
However, underlying bullish fundamentals remain intact. Tightening global crude oil supplies due to factors like the OPEC+ production cuts, the Russo-Ukrainian war, and potentially slowing US shale oil production continue to support prices. Additionally, data suggests a steeper-than-usual decline in global oil inventories, raising concerns about future availability.
The upcoming CERAWeek conference hints at a potential shift in sentiment towards peak oil demand forecasts, with some industry leaders questioning their validity in light of current market realities. This could lead to a reassessment of future oil demand and potentially provide further upside for prices.
Technical
The 4-hour chart shows that the oil futures are currently trading around $81.06/BLL, finding support in a critical zone after recent declines. The price action sits above the 50-SMA (blue line) and 100-SMA (orange line) but remains below the 20-SMA (green line). This indicates a potential uptrend facing short-term resistance.
A sustained move above the 50-SMA could see the 23.60% Fibonacci retracement level ($81.63/BLL) tested as initial resistance. A decisive break above this level, accompanied by significant volume, could confirm bullish momentum and potentially target $82.48/BLL and $83.12/BLL.
However, the RSI (48.45) hovering below 50.00 suggests a waning bullish momentum. A sustained push below the current support zone could bring the 50.00% Fibonacci retracement level ($79.97/BLL) into play. A significant break below the psychologically important $80.00/BLL level could trigger further selling pressure, with the 61.80% ($79.21/BLL) and 78.60% ($78.14/BLL) Fibonacci retracement levels as potential downside targets.
Summary
WTI Crude Oil faces mixed pressures as geopolitical developments and a stronger US dollar influence market sentiment. While a possible ceasefire in Gaza offers hope for easing tensions, the US dollar’s rally and profit-taking weigh on prices. Technical indicators suggest a potential upward movement if the price maintains a breakout above $81.63/BLL, backed by strong volume, while a confirmed breakdown below $80.00/BLL could trigger a sell-off.
Sources: TradingView, Trading Economics, Federal Reserve.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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