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Crude Oil Prices Sink Despite OPEC+ Cuts, 1998-Low Nearing Next?

Crude Oil Prices Sink Despite OPEC+ Cuts, 1998-Low Nearing Next?

Daniel Dubrovsky, Strategist

Crude Oil Prices, WTI, OPEC, 18-Year Low - Technical Forecast

  • Crude oil prices sink over 20% in another dismal week despite OPEC+ cuts
  • WTI at 18-year low testing support that can expose cheapest price since 1998
  • Will oil approach single-digit prices? Fading momentum may hint at bounce

Crude Oil Weekly Recap

Crude oil prices fell over 20 percent in another dismal week despite efforts from OPEC+ and major oil-producing nations to reduce production to help boost prices. OPEC estimated that demand for oil could fade to its lowest in 30 years as the coronavirus grinds global travel to a halt. This issue may have also been why energy prices have been diverging with broader sentiment set by global equities such as the Dow Jones.

From a technical standpoint, WTI has extended loses after prices broke under rising support that guided the commodity higher from 2016 until the beginning of this year – red line below. Taking a look at the monthly chart, WTI is now down to its weakest since late 2001/early 2002 which makes for an 18-year low. Broadly speaking, guiding the commodity lower has been descending resistance from the July 2008 peak – pink lines.

WTI Crude Oil Weekly Chart

WTI Crude Oil

Crude Oil Chart Created in TradingView

Crude Oil Technical Outlook

Zooming in on the daily chart, WTI is facing key support from 18 years ago which makes for a barrier between 17.80 to 17.12. Taking this area out in the week ahead exposes the cheapest price since 1998 at 10.65 which would also bring oil on the cusp of revisiting single-digit prices. Guiding the commodity lower appear to be two falling trend lines labeled “inner” and “outer” resistance – pink lines.

Taking out the former may not necessarily overturn the dominant downward bias. I would like to see a push above “outer” resistance for there to appear a meaningful shift in oil’s trajectory. Yet there is quite noticeable positive RSI divergence, a clear sign that downward momentum is running out of steam. That can at times precede a turn higher perhaps as prices revisit the current April high at 29.10.

Should the latter occur in the week ahead, that would also mean a push above “inner” resistance which could set prices on their way towards testing “outer” resistance. But from a fundamental standpoint, that may entail some combination of further efforts to reduce supply or see nations dive into easing social distancing measures. The latter is also no guarantee that virus cases don’t resurface and carries numerous uncertainties.

WTI Crude Oil Daily Chart

WTI Crude Oil Daily Chart

Crude Oil Chart Created in TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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