WTI Crude Oil (NYMEX: CL) faced a significant decline, dropping to around $76 per barrel on February 15, 2024, following the release of official data indicating a massive 12 million barrel surge in US crude inventories. This exceeded market expectations and raised concerns about demand in the largest oil consumer globally. Despite geopolitical tensions in the Middle East and the Russia-Ukraine conflict, oil prices slipped further.
On the positive side, the Energy Information Administration (EIA) reported unexpected declines in US gasoline and distillate stocks, which fell by 3.7 million barrels and 1.9 million barrels, respectively. Geopolitical factors provided some counterbalance against concerns about delayed US interest rate cuts.
Technical
After breaking below the ascending channel and 20-SMA (green line), oil currently trades above the 50-SMA (blue line) and 100-SMA (orange line). This suggests a potential rangebound behaviour with both upside and downside possibilities. The RSI (43.11) indicates relative stability after a steep decline, suggesting a possible consolidation phase before the next directional move.
Short-term trading opportunities towards the 22.60% Fibonacci retracement level ($77.03/BLL) could exist should the price action find significant support at the 38.20% Fibonacci retracement level or longer-term SMAs. A break above the $77.03/BLL level would likely bring $78.77/BLL and $79.29/BLL resistance levels within the bulls’ reach in the short term.
However, the support level at 50.00% Fibonacci retracement level ($75.09/BLL) would come into play should the SMAs fail to hold. A break below the initial support, at significant volume, could confirm the bearish momentum, likely bringing the 61.80% Fibonacci retracement level ($74.22/BLL) into play.
Summary
The short-term outlook for WTI Crude Oil is uncertain. While the inventory build and refinery outage exert downward pressure, positive demand indicators and geopolitical tensions provide some support. The price action is currently testing the 50.00% Fibonacci retracement level, and a break below this level with significant volume could confirm a bearish continuation towards the 61.80% retracement. Conversely, a bounce off the support and a break above the 22.60% retracement could signal a short-term bullish move towards the $78.77/BBL resistance level.
Sources: TradingView, Trading Economics, Dow Jones Newswire, EIA, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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