The past few weeks have seen fluctuations in the price of crude oil, with support levels seen at $77 per barrel for WTI and $82 per barrel for Brent. There has been a period of consolidation since the second half of February, during which the price struggled to rise above the 200-day average. The recent drop of 4.5% in two days has pushed the price below the 50- and 200-day moving averages, indicating a potential bearish trend. The current consolidation phase may be an attempt to correct short-term oversold conditions before initiating a new downward movement.
The consolidation area coincides with the support of an ascending corridor that has been in place for the past five months. A further decline could signal a break in the uptrend, with downside targets of $75 for WTI and around $79 for Brent. These levels also correspond to the 200-week moving average, which has historically influenced market sentiment. The failure to hold above key support levels could indicate a shift in market dynamics, favoring sellers.
The US government’s recent actions to replenish oil reserves during downturns suggest a changing stance from previous years. However, OPEC support and reserve purchases may not be sufficient to sustain prices under certain circumstances. The possibility of a significant price drop to $30 per barrel is mentioned, although this scenario would require extreme market dysfunction. The main scenario remains optimistic, with the expectation of a price rebound driven by production cuts from OPEC+.
The recent increase in commodity prices, coupled with China’s efforts to stimulate economic growth, could provide additional support for the oil market. The ease of production cuts by OPEC+ members suggests a potential reversal of the current downtrend. Despite the current uncertainties in the market, signs of a significant market dysfunction are not yet evident. The overall outlook points towards a potential recovery in oil prices in the near future.