Home Forex Markets WTI crude oil price trend or defeat is set, but beware of short-term rebound

WTI crude oil price trend or defeat is set, but beware of short-term rebound

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WTI crude oil price trend or defeat is set, but beware of short-term rebound


With the help of EIA inventory data and short-term damage to risk appetite, WTI crude oil prices have broken below the key support level this week, returning to the level before the Russian-Ukrainian military conflict, which opens the door for further downside. However, the price of WTI crude oil stopped falling near the key support level of 88. In the short term, we should be alert to the rebound correction and test the resistance near 93. If such a market occurs, it may provide a better opportunity to short rallies.

WTI crude oil prices fall to new low since February as demand concerns gain more focus

The price of WTI crude oil continued to fall after last Friday’s high this week. Although the decision made by the widely watched OPEC+ production meeting was favorable for oil prices, the price of WTI crude oil still fell back to the level before the Russia-Ukraine conflict in February. According to OPEC+’s decision on Wednesday, the sharp cut to 100,000 barrels per day (bpd) of production increases starting in September is almost indistinguishable from keeping output unchanged.

The analysis believes that OPEC+ does not want to consume the already very limited spare capacity and is reluctant to increase production significantly for maintaining relations with Russia. Moreover, we should understand that the production increase target of OPEC+ has long been only a form, because OPEC+ has often failed to meet the production increase target since the beginning of the year. However, this seemingly positive event has not boosted WTI crude oil prices, mainly because the market is now turning its attention to concerns about insufficient demand.

This week’s EIA data showed that US commercial crude oil inventories increased by 4.467 million barrels in the week to July 29, while strategic crude oil reserves decreased by 4.690 million barrels in the week. The increase in commercial inventories has coincided with a reduction in the strategic stockpiles that have been sold off in the U.S. in a single week, which can be seen as a sign of weakening demand. In addition, the escalation of the situation in the Taiwan Strait this week has increased the resistance to the global economic recovery and also brought a blow to the price of WTI crude oil.

Friday’s U.S. non-farm payrolls data was much stronger than expected, with a result of 528,000 versus 250,000 expected. Combined with the previously released July US ISM manufacturing and service index also stronger than expected, these data will temporarily ease concerns about the US economy and may create opportunities for a rebound in WTI crude oil prices to correct.

OPEC+ is sluggish to increase production, and the United States is dumping its strategic reserves. What will happen to oil prices in the third quarter? 👇👇👇

Technical Analysis of WTI Crude Oil Price Trend

The four-hour chart shows that the price of WTI crude oil fell below the support near 93 this week, which is the key support level that has limited the decline of oil prices since March, so the breakdown of this support level means that there is broad room for future declines.

However, after several days of decline, WTI crude oil prices stopped falling near 88, which is located at the combination of the 61.8% Fibonacci retracement of the rally from December last year to March this year and the middle track of the descending channel. To stabilize the support in the short term, there may be a chance for a rebound and correction, and focus on 90 for the initial resistance.

Given the overall bearish outlook below 93, a rally to the upside may provide better shorting opportunities on rallies. Of course, if it fails to rebound and correct, but immediately falls below 88, it means that the decline continues, and the follow-up decline target is 85 or even 80.

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