Crude oil forecast: WTI holds key support after sharp sell-off

Oil drilling in sea
Fawad Razaqzada
By :  ,  Market Analyst

Oil prices are staging an oversold bounce after finishing lower for the fifth consecutive day on Tuesday. It remains to be seen whether this recovery will last given ongoing concerns over demand and the OPEC+ decision to eventually phase out the voluntary output cuts at a time when non-OPEC supply is on the rise. However, these concerns might be priced in by now, which should mean that prices could find some much-needed support, especially now that we are in the middle of the US driving season when demand tends to pick up. Today’s release of a much stronger-than-expected ISM services PMI report has also helped to reduce economic slowdown fears, and this is helping oil prices. Traders have largely shrugged off the unexpected build in US crude oil stocks. In light of today’s recovery, the short-term crude oil forecast has turned moderately bullish.

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Crude oil forecast: technical analysis

 

The sharp 1.6% rebound means WTI is now back above the high of Tuesday’s range, thus breaking a prior day’s high for the first time in five sessions. This is potentially a positive sign for prices as dip-buyers try to provide a floor around these technically-oversold levels. The RSI hit the oversold threshold of 30 yesterday.

 

Prices found support from around the $72.50 – $73.00 area, which is where the last significant rally that commenced in February took place.

crude oil forecast

Source: TradingView.com

 

Key resistance and support levels to watch

 

The bulls now need to defend their ground around the $74.00 area, which was previously resistance. If successful, we could see a decent continuation of the bounce in the days ahead.

 

The recent decline in oil prices has established a clear resistance level to monitor in the range of $76.00 to $76.50 on WTI. This zone is critical; as long as prices stay below it, the bearish trend is expected to continue, even if the current rebound persists and some bullish activity is observed at these lower levels.

 

The top of the bearish channel is an additional area of resistance to watch should prices eventually get there.

 

Meanwhile, if support around $73.00 eventually breaks—a level that corresponds with the support trend of the bearish channel that has been in place since prices peaked in April—then the next major support levels below this area are at $70.00, followed by the December low at $67.87.

 


For more updates on the crude oil forecast and analysis, stay tuned to our latest reports and insights.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

 

 

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