WTI crude oil: When prices can’t rally on good news…

There’s an old saying in trading that crude oil bulls should be keep top of mind this week: If a market can’t rally on good news, it’s likely headed much lower.

On Monday, OPEC+ surprised markets by cutting production by 100K bpd starting in October, suggesting that the oil cartel would like to see prices supported, despite fears of a global recession. Crude prices rallied briefly above $90 before rolling over to reverse those gains yesterday.

Then, earlier today, top US officials reportedly told Israel’s PM that a nuclear deal with Iran was unlikely in the foreseeable future. Most analysts view a nuclear deal as a precursor for Iranian oil supplies to come back on the world market, so the report that that first step was further away than previously thought suggests that there will be less supply (and, theoretically, higher prices) for longer than assumed.

Rather than using that report as an opportunity to buy WTI (US Oil) off technical support at 85.00, traders have instead sold crude down to its lowest level since January, before the war in Ukraine even began. In other words, oil traders have now had two chances to bid up oil on better-than-expected news this week, and on both occasions, crude was trading much lower in just a handful of hours.

Technical view: West Texas Intermediate crude oil (US Oil)

As we mentioned above, oil is breaking below previous support at 85.00 to its lowest level in nearly eight months. Crude is clearly putting in a series of lower highs and lower lows below its downward-sloping 100-day EMA, signaling a clear bearish trend over the last couple months. Despite the new lows in price, the 14-day RSI indicator is not even in oversold territory, hinting that prices may have further to fall before seeing any technical respite from the selling:

Source: TradingView, StoneX

To the downside, the next important level to watch will be $80.00 round number, followed by the 78.6% Fibonacci retracement of the 2022 rally near $77.00. To flip the near-term bias in favor of the bulls, traders would need to see prices rally sharply from here to regain the 100-day EMA at $98.00.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.