- Lack of interest but also fundamental developments can best characterize the situation that crude futures are currently facing, with neither the bulls nor the bears having strong enough resolve of getting control of the direction of the commodity.
- Intensified airspace incursions from Russia over the past week, sent wake up calls across the NATO allied members and unnerved nearby Baltic nations, who scumble to find a solution to the problem, hopefully refraining from triggering article 5 of the coalition and averting a major escalation of the conflict that could overspill into the wider Euro area.
- Trump’s narrative switch in favour of Ukraine at the UN council meeting also hinted that the US administration may be losing hope for a conflict resolution between Russia and Ukraine.
- Ukraine’s strikes on Russian infrastructure raised odds for export restrictions against each other and the shutdown of key infrastructure sites and refineries kept supply disruption worries alive alongside the threats from US President who stands ready to impose “major” sanctions on Russia if NATO countries and Europe take similar steps.
- Lastly, even though the Federal Reserve lowered its key benchmark rate by 25bps yesterday and signalled its intents at lowering further its policy rates, energy markets remain somewhat cautious and unreactive to the prospects of higher demand (stemming from looser financial conditions) and remained fixated upon prospects for softer economic growth.
Technical Analysis of Oil
WTI Chart – Bears remain in control yet US-Russia talks could induce shift in dynamic
- Resistance: 65.60 (R1), 68.70 (R2), 72.50 (R3)
- Support: 61.50 (S1), 58.00 (S2), 55.15 (S3)
Crude futures are currently gyrating aimlessly around the $64 per barrel level as lack of catalysts keeps energy traders on the sidelines with their hands tied. Given the lack of substantial fundamental catalysts and the fact that neither the bulls nor the bears appear to be taking hold of the initiative, we maintain our bias for the prolongment of the sideways scenario for the time being.
Supporting our case is an RSI value that interchangeably crosses above and below the 50 level for some time now, alongside the ADX value now gyrating around the 20 level, due to lack of strength from either the bulls or the bears. +DI is currently hovering above the -DI, indicating marginal strength from the bulls, momentum strength is relatively flat and requires substantial volume for the price action to move swiftly. We note however, that in the scenario where the bulls find enough resolve, drive price action decisively above the descending trendline and lead the charge of the $65.60 (R1) resistance ceiling, we would be forced to consider a possible change of our assessment and lean towards a bullish bias. Should on the other hand, the bears regain control and drive prices lower, we would require first seeing a successful break of the $61.50 (S1) support area before altering our bias towards the bearish side.
