Crude oil outlook: WTI bounces off lows but selling could resume

WTI crude oil managed to bounce $1 off its earlier lows to trade around $76.00 after earlier dipping to $75.00 support level. That dip was bought, supported in part by ongoing risk-rally with equity indices also still maintaining their bullish structure. With China’s improving economic conditions, demand concerns have reduced and in the short-term there is little risk of an oil glut forming, but the slightly longer term outlook is a bit murky with the potential for another supply war to emerge between US shale and OPEC+ producers.

Longer term crude oil outlook bleak amid potential for US supply surge

"We will drill, baby, drill" is what Trump promised yesterday, and this had an immediate influence on oil prices. Trump emphasized a push for increased domestic oil production, aiming to lower global energy prices by boosting supply. Let’s see if he will be able to achieve this goal. The lack of a more meaningful drop can be explained away by the fact this was something he had already announced. Still, regardless of what prices do in the short-term, the long-term outlook is bearish: The expected increase in US shale production, combined with the OPEC potentially returning withheld supplies, means the upside should be capped. Demand growth may not keep up with the potential increase in global supplies.

Crude oil outlook: WTI technical levels to watch

WTI has been trending downward over the past few days, breaking a few key support levels that have now turned into resistance, such as the area around the $77.00 mark.

Source: TradingView.com

Earlier, prices dipped to test the first significant support zone near $75.00, which triggered a bounce. Here, a short-term bullish trend line and prior resistance met the psychologically important level. A technical bounce made total sense.

At the time of writing, WTI was testing the broken support zone in the $76.40 to $77.15 range. The question is: will sellers re-enter the market at this level or await a deeper retracement?

With Trump's bearish oil policies at the forefront, this could reignite selling pressure again. Tactically, our crude oil outlook will turn bearish in the event WTI breaks and closes below the $75.00 handle today.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.