Inflation Data and Central Bank Hawks Weigh on Oil Prices

News and analysis of Brent and WTI crude oil

• The poor global outlook appears to be capping oil prices despite the cumulative production cuts
• WTI is approaching the previous important level of $67 which served as a pivot point before
• Brent is looking at $71.50 as the next support level
• IG client sentiment is giving a mixed signal but very long positioning is showing further decline
• The analysis in this article is used chart patterns and key Support and resistance levels. For more information visit our comprehensive website Educational library

Oil markets fail to shake the negative sentiment as a well-established support level gets in the way of the extended sell-off

Oil markets are anticipating an upcoming economic headwind as bullish momentum fails to materialize despite cumulative OPEC production cuts. In fact, oil continues its decline ahead of the start of production cuts in Saudi Arabia (one million barrels per day) starting next week as central bank chiefs are expected to warn of further price hikes in the future.

Higher interest rates have the intended consequence of dampening global demand in order to reduce the widespread price pressures that took hold in the aftermath of Russia’s war against Ukraine and earlier supply constraints due to the Covid lockdowns.

WTI is heading towards a familiar pivot point

WTI (US crude) prices have fallen sharply since marking the $72.50 handle which provided turning points in January and February this year. Trading through the psychological $70 level with relative ease, prices are now heading to $67 – the lower end of the range the Biden administration has set as the level needed to replenish reduced SPR levels. This is no longer the case, but the level has continued to act as false support for oil prices regardless. A convincing close below this level opens the market for potential extended selling towards $62. The resistance is at $70 but the MACD is indicating continued momentum to the downside.

WTI Crude Oil daily chart

Source: TradingView, prepared by Richard Snow

Brent Crude Oil is approaching a test of the sell-off

Looking at the daily chart of Brent Crude, a similar tick mark has developed in the recent trading sessions, with an emphasis on a very key support level. Like WTI, Brent crude prices have approached the support level which has so far stopped further selling on a number of occasions and could be tested again. $71.50 is the level in focus, with a decline to $67.50 likely on further downside momentum. Resistance lies in the 50% retracement of the key advance from 2020 to 2022 ($77).

Brent crude oil daily chart

Source: TradingView, prepared by Richard Snow

The extreme positions of the shorting network pose a potential challenge to the downside continuation

Oil – US Crude:Retail trader data shows that 86.96% of traders are net long with the ratio of long to short traders being 6.67 to 1.

We usually take a standpoint opposed to the sentiments of the masses, And suggests the fact that traders are resilient oilUS crude oil prices may continue to decline.

The number of long traders is up 4.78% compared to yesterday, and 30.42% higher than last week, while the number of short traders is 8.17% higher than yesterday, and 25.00% lower than last week.

Positioning is net less than yesterday but more net than last week. the A mixture of current feelings and recent changes gives us Further mixed oil – the United States Raw trading forecast.

– Posted by Richard Snow for DailyFX.com

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