- Crude futures eased further over the past week, travelling lower, closer to the $61.50 level, capturing a 3-month low as demand for the energy commodity dissipated further.
- Earlier this week the US administration announced the doubling of tariffs on India, lifting import levies to 50%, to pressure the most populous country in the world to effectively cut ties with Russia, indirectly coercing the nation to limit its oil purchases.
- India is the third largest buyer of crude globally, but more importantly Russia’s largest oil client and cheap crude from Russia is a crucial component in Modi’s plans to rejuvenate further its nation’s industrial capabilities.
- Analysts do however expect India to continue buying Russian crude in the short term, effectively staying on course and tempering the adverse impact. Reports showcase that India will go forth with purchases for September and October, defying the treats but raising at the same time the efficacy of tariffs.
- Brewing on the sidelines are worries for a failure of the resolution of the war in Ukraine as both Russian and Ukrainian forces amped up strikes on respective energy infrastructure sites, a week after peace talk negotiations between Trump and Putin.
Technical Analysis of Oil
WTI Chart – Crude hits 3-month lows as bearish pressure persists
- Resistance: 64.60 (R1), 68.50 (R2), 72.50 (R3)
- Support: 61.30 (S1), 58.00 (S2), 55.15 (S3)
Selling pressure persisted over the past week with the bears remaining in control of the move and WTI futures finding somewhat of a support above the $61.30 area, retested the $64.00 resistance ceiling, failed and then eased towards the $64 per barrel area. We maintain our bearish outlook bias for the commodity given its continual negative pressure, and supporting our case are both the MACD and signal lines travelling in the negatives indicating bearish sentiment, alongside the RSI value of 47 validating that the bears marginally in control. Momentum nevertheless evaporated, hence the muted volatility and the merging of -DI and +DI indicates temporary inactivity from both sides.
Should the bears maintain control and extend their reign, we would reasonably expect to see a break below, $61.30 (S1) support level, and head south, towards the $58.00 (S2) support zone, and hit 3 and half month lows. Should on the other hand the bulls take the initiative, we may see the commodity climbing above the $64.60 (R1) closest resistance level and after a successful break and head on to challenge the $68.50 (R2) area.