- After technical indicators flashed oversold market conditions late last week, crude traders’ dip buying activity has managed to successfully keep the commodity’s price above the $55 per barrel area and safeguard it from breaching into territory last seen before in February of 2021.
- Even though OPEC+ decided to accelerate it output hikes and boost production at their May meeting, oversupplying the market with crude and thus placing firm pressure on the commodity, traders primarily fixated upon the scheduled US-China meeting, hoping that the world’s two largest consumers of oil will come to a mutually beneficial agreement, keeping demand elevated.
- Another development that supported oil prices this week were the announcements by two major US producers, Diamondback Energy and Coterra Energy, stating that they plan to reduce their operating rig counts and drilling activity, to helping to limit production and somewhat counter the oversupply of the commodity into the domestic market.
Technical Analysis of Oil
WTI Chart – Negative momentum drives WTI prices closer to fresh 4 year lows
- Resistance: 60.00 (R1), 63.60 (R2), 67.00 (R3)
- Support: 55.15 (S1), 52.50 (S2), 50.00 (S3)
The commodity has been gyrating between the $60.00 (R1) resistance and $55.15 (S1) support levels over the past week, as the bulls managed to counter the strength of the bears and contain the price from dropping into territory last seen before in February of 2021. Albeit the consolidation of price action near 1-month lows and frankly the lack of catalysts, we hold dearly to our bearish bias in favour for the extension of the fall towards fresh lows. Supporting our case is the RSI indicator which registers a value of 40 indicating the bearish tilt alongside the histogram of the MACD indicator that still denotes the strength of the negative momentum. Furthermore, the failure of price action to snap above both the 12 and 26 EMAs still signals that no shift in trend has taken place, and that the direction remains still towards the downside. Should the bears remain in control and selling pressure upticks, we would reasonably expect to see WTI retesting and breaking below the $55.15 (S1) support area and possibly challenging the $52.50 (S2) zone, hitting fresh 4-year lows. Should the bulls find enough resolve and take over, we may see the commodity escaping the recent consolidation mode, rebound from here and break above the $60.00 (R1) resistance level and move closer to the $63.60 (R2) resistance barrier.
