For some time now, we have been providing relatively accurate price targets for the WTI crude oil. Last year, we navigated the oil bull market from 60 USD per barrel up to 100 USD a year later. Then, in April 2022, we called the peak in the oil market and laid out a few reasons why the oil market could temporarily bounce, but it would continue lower despite that. In addition to that, we said the oil price would drift back toward the 100 USD price tag over the medium/long term.
Recently, USOIL reached our price target of 100 USD and 95 USD. Then today, it paused a decline just 0.17 USD above our short-term price target of 90 USD. Despite that, we remain bearish on crude oil and maintain our price target of 90 USD and our long-term price target of 80 USD per barrel.
There are several fundamental and technical reasons behind our stance. First, fundamental reasons such as higher interest rates and economic tightening will inadvertently slow down the global economy. Indeed, several indicators flash warning signs of a recession in progress. Ultimately, that means lower demand for oil in the medium/long term, especially from China.
Furthermore, the OPEC's supply increase of another 100 000 barrels per day in September 2022 will weigh on the weakening demand for oil. That, combined with reportedly high stockpiles of crude by the EIA, will lower the oil price in the foreseeable future. The same applies to the recent actions by western countries in regard to loosening sanctions on Russian oil.
Illustration 1.01 The price of oil continues to move within the downward sloping channel.
Technical analysis - daily time frame RSI, MACD, Stochastic, DM+, and DM- are all bearish. Overall, the daily time frame is bearish.
Illustration 1.02 WTI oil futures on the weekly chart confirm our assessment of the declining demand for oil, which is reflected in the declining volume since the peak price.
Technical analysis - weekly time frame RSI, MACD, Stochastic, DM+, and DM- are all bearish. Overall, the weekly time frame is bearish.
Illustration 1.03 The daily chart of WTI oil futures shows the increase in selling pressure, which is particularly bearish.
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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade closed: target reached
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Our short-term price target of 90 USD was hit.
Trade active
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We update the long-term price target of 80 USD to the medium-term price target.