For some time now, we have been skeptical about the overly bullish narrative in the oil market. Additionally, we have disagreed with calls for a return to triple-digit prices while noting multiple times that oil was likely to be choppy throughout 2023, oscillating within a wide range. In fact, we later presented a similar view from the U.S. Energy Information Administration (EIA), which sees WTI crude oil average $77 per barrel in 2023. Today, we continue to stick to our previous assessment. Indeed, we are inclining toward the notion that oil will likely dip below $70 during the year (which may not be that far). However, we voice a word of caution as the price drop might be shortlived due to the U.S. administration seeking to refill its Strategic Petroleum Reserves (SPR) at the lower end of $70.
Illustration 1.01 Illustration 1.01 shows the daily chart of USOIL. If the price breaks below the sloping support, it will bolster the bearish odds in the short term.
Technical analysis Daily time frame = Bearish Weekly time frame = Neutral
Illustration 1.02 Illustration 1.02 displays the daily chart of USOIL. Additionally, it shows two simple moving averages (SMAs). The yellow arrow indicates the price retracement toward these SMAs. If the price holds above them, it will be bullish. Contrarily, if the price breaks below SMAs, it will be bearish in the short-term.
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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.