The OPEC+ production cuts have not led to any rally in the oil market, but they helped with stabilising the prices around the $70 level. From this perspective, OPEC+ is doing a good job but the risk of a global recession and even lower demand are still present in the market and keep the bias skewed to the downside. In the short term though, we might see higher prices because of more economic stimulus in China given that it is about to slip into deflation. It’s unlikely that baby steps like the 10 bps cuts we saw in the previous month would be sufficient to make the prices rally though.
WTI Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that since bouncing from the $67.00 support, Crude Oil has rallied all the way back to the $75.00 resistance. That’s where the price has opened the last time Saudi Arabia surprised with a voluntary production cut and the other OPEC+ members extended the cuts into 2024. What happens here will be key for the oil market going forward as a break to the upside can open the door for a rally into the $83.00 resistance.
WTI Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that Crude Oil has been trading within a rising channel coming into the $75.00 level. We can see that the moving averages are crossed to the upside and acting as dynamic support for the price. We are likely to see the sellers stepping in here with a defined risk above the level and target the $67.00 support again. The buyers, on the other hand, will want to see the price breaking higher before piling in more aggressively and start a rally towards the $83.00 high.
WTI Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the last leg higher is diverging with the MACD right at the $75.00 resistance and the upper bound of the channel. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we should see a pullback into the previous swing low level where we can also find the 50% Fibonacci retracement level and the lower bound of the channel for confluence. That would be a good spot where the buyers can lean on to with a defined risk below it and target a break above the resistance. If the price breaks below the lower bound of the channel though, the bullish setup would be invalidated, and the sellers would be in control.
Upcoming Events
Today the main event is the US CPI report. We are likely to see risk off in the markets and Crude Oil lower if the data beats expectations, especially on the core numbers. On the other hand, a miss to the forecasts should lead to a positive mood in the markets and Crude Oil should be supported. After the US CPI release, we will have the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday.
