Outlook on oil prices:
- WTI prices have corrected lower in recent days on demand concerns
- Despite near-term headwinds, oil maintains medium-term bullish outlook
- From a technical perspective, if the important support holds around the $100 level, buying interest could rise, paving the way for a move towards $105.00.. On the other hand, a breakout may portend further losses
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Crude oil prices (WTI) started the week lower and took a hit Biggest drop since late Marchdown more than 6% on the day, weighed by demand concerns Because of the closures in China Speculation is growing that the world could be heading into a recession. On Tuesday, selling pressure It eased in early trade, but rose again in the afternoon, with West Texas Intermediate crude futures down more than 2.5% to ~$100 a barrel, Where merchants remain hesitant To jump back to take over Long positions with many unknowns still remains.
Despite the recent weakness and turmoil, Oil maintains a bullish outlook in the medium term due to Supply and demand imbalances in global markets. Although the current COVID-19 wave and related lockdowns in China It may create near-term headwinds and fuel fluctuations, the situation should improve in the coming weeks once movement restrictions are lifted.
If we judge by The downward trend in new infections with the Corona virus and the decline in community transmission in Shanghai, the government could begin easing protective measures in place by the end of the month or, at the latest, early June if historical patterns prevail. Once that happens, Oil imports must accelerate Before the summer season when demand is high, which supports fossil fuel prices.
There is also something else Rising driver on the horizon: the European Union’s plan to Blocking Russian Oil Imports for its attack on Ukraine. The ban is still being negotiated amid opposition from several member states, such as Hungary and Bulgaria, but both countries have been willing to make concessions if they are granted waivers and are able to secure alternative energy sources. In any case, an agreement to move forward with the new sanctions package is expected in the second half of May. Details are finalized, but once fully implemented over six months, the in stages pan It could displace about 3.5 million barrels of crude and refined products from Russia, exacerbating the market’s deficit end of the year.
In terms of technical analysis, WTI price is above trend line support near the psychological $100 level at the time of writing. If the bulls regain control of the price action and spark a meaningful recovery, initial resistance will appear at $105.00, the 50-day simple moving average, followed by $108.00. For more strength, focus shifts to $111.55, the 50% Fib retracement of the March/April decline. On the other hand, if oil extends its recent correction and breaks below $100 a barrel on the weekly closing prices, selling interest may gain momentum, paving the way for a move towards $95.35, followed by $93.00, the April low.
crude oil technical chart
WTI oil chart was prepared using TradingView
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— By Diego Coleman, Market Strategist