The price of WTI crude oil fell sharply for two consecutive days. In today’s European session, the price of WTI crude oil rebounded sharply, taking advantage of a slight recovery in risk appetite. Technically, the bearish outlook formed after the price of WTI crude oil broke the rising flag yesterday is still valid, so despite the short-term rebound and rising, we should be alert to the risk of resuming the downward trend below the 109-110 area.
Yesterday, the OPEC+ meeting approved the original plan to increase production by 648,000 barrels per day in August. It is also reported that Saudi Arabia and other OPEC countries are worried about the exhaustion of idle crude oil production capacity. It is worth noting that previous data showed that the daily crude oil production of OPEC+ members in May was 2.7 million barrels per day less than their total production target, which means that although the plan is to continue to increase production, the actual output did not meet the plan at all. Target.
So after the OPEC+ decision was announced, WTI crude oil prices were under pressure and weakened, although this increase in production was only on paper. The reason why the market will react this way is mainly because concerns about the economic slowdown and the decline in crude oil demand have become one of the important factors for the market to bet on oil prices.
U.S. economic data overnight showed that personal spending, adjusted for inflation, fell for the first time this year in May, with gains in the previous four months being revised down. Combined with the previously released first-quarter GDP data (shrinking 1.6%), it shows that the risk of a recession in the US economy is real and visible. The latest forecast from the Atlanta Fed’s economic forecasting model predicts that the U.S. economy will continue to shrink by 1.0% in the second quarter.
While the economic downturn could hit crude demand, it should also be noted that the U.S. stock market’s entry into a bear market dragged WTI crude prices. U.S. equities are weak as we can see the Fed not showing concern that rate hikes will hit the economy, which will weigh on all risk assets including crude oil.
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Technical Analysis of WTI Crude Oil Price Trend
The four-hour chart shows that WTI crude oil prices fell below the ascending channel (rising flag) formed by the recent rebound yesterday, establishing a bearish outlook, suggesting that the rise within the flag may just be a correction in the downward trend that began at the June high. But today WTI crude oil prices rebounded sharply again, if the next rise above 110, it means that the bearish outlook failure trend will continue to rise. Conversely, if the price fails to get back above 110, the bearish outlook will remain valid and a pullback may point towards 105 and 100 again. (Follow the author on Twitter @Legen_DailyFX )
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