Crude Oil Market Outlook Darkened by Debt Ceiling Debacle and Recession Risks

Crude Oil Outlook:

• oil the prices Falling for the fourth straight week, the Bears tag remains on the wheel
• The rising recessionary risks, along with the impasse of the US debt ceiling, are likely to affect energy markets in the near term.
• This article looks at the key technical levels to watch oildaily chart

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Crude oil prices (as measured by WTI futures) fell on Friday, settling slightly above $70.00 a barrel, and closing lower for the fourth straight week, weighed by growing fears of a US recession and its negative effects on cyclical commodities. .

Although the US is not yet in a recession, market indicators, such as an inversion of the yield curve, point to an arrival soon. The outlook certainly remains volatile and subject to change, but the recent turmoil in the US banking sector has reinforced downside risks, raising the possibility of a downturn later this year.

The United States has the largest GDP in the world, so a recession could severely curtail global growth, and reduce demand for fossil fuels across the board. This could have a detrimental effect on oil prices, as most losses are likely to be concentrated at the onset of a recession, given the forward-looking nature of the markets.

The US debt ceiling crisis is making things worse for energy commodities. While the US reached its debt limit in January, the Treasury Department was able to continue to pay its bills through the use of extraordinary measures, but available cash could run out as soon as early June if the federal government fails to take corrective action.

If the country’s borrowing ceiling is not raised soon, default could occur within weeks, with catastrophic consequences for the economy and financial system. Most likely, the Democrats and Republicans will come to an agreement at the eleventh hour, but that may only happen once the markets start to shake and fall off a cliff.

In the current environment, oil prices will remain low, which means that more losses may be on the horizon. With sentiment around thin ice, market conditions can get quite deceiving in the blink of an eye, so traders should watch the headlines carefully in the coming days to prevent getting caught on the wrong side of the trade.

Technical analysis of crude oil

In terms of technical analysis, WTI Oil is standing above the trend line support near $70.00 after the recent losses. If the bulls fail to defend this floor and sellers push prices below it decisively, a deeper drop towards $66.00 could be in order. With further weakness, the bears could challenge the 2023 lows.

On the flip side, if prices rebound from current levels, initial resistance appears at $72.00. A successful move above this barrier could open the door for a rally towards USD 73.75, followed by USD 76.50.

Crude oil price chart

Crude oil futures chart created using TradingView