WTI oil - The downtrend is not done with the oil market
Previously, we stated that we wanted to avoid setting a price target for the short-term and medium-term because of high volatility and rumors (then actions) affecting OPEC's supply. Instead, we said that we would focus on our long-term price target of 70 USD. Since then, the price of WTI oil had fallen approximately 4% before erasing some losses.
Today, we are still committed to our long-term price target and expect volatility in the oil market to stay persistent, with the U.S. and OPEC attempting to reach their own economic and geopolitical interests. In addition to that, we are growing even more pessimistic on the topic of demand because of several reasons.
First, the stock market has been in a bear market for the past few months, dramatically raising prospects of lower oil demand over the coming months (especially as the FED will continue to tighten and worsen economic conditions). Second, the OPEC recently confirmed this same narrative about the declining demand when it slashed its demand growth forecast for 2023 from 2.6 million bpd to 2.3 million bpd. Third, a likelihood of more strategic petroleum reserves being released by the U.S. to dampen the price.
Besides that, our views are also supported by technical factors, pointing to liquidity issues in the overall market. We believe this tremendously increases the odds of a stock market crash. As if it was not enough, futures oil contracts manifest backwardation. Therefore, we voice a word of caution to investors.
Technical analysis - daily time frame
RSI, Stochastic, and MACD are bearish. DM+ and DM- performed a bearish crossover. Overall, the daily time frame is bearish.
Illustration 1.01
We introduced the setup above yesterday when the price was near its low. Now, we believe that the time is running out quickly for the long trade. Therefore, we would like the price to break below the short-term support to support the bearish thesis in the short-term term.
Technical analysis - weekly time frame
RSI and MACD are bearish. Stochastic is bullish. DM+ and DM- are bearish. Overall, the weekly time frame is bearish.
Please feel free to express your ideas and thoughts in the comment section.
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.
Today, we are still committed to our long-term price target and expect volatility in the oil market to stay persistent, with the U.S. and OPEC attempting to reach their own economic and geopolitical interests. In addition to that, we are growing even more pessimistic on the topic of demand because of several reasons.
First, the stock market has been in a bear market for the past few months, dramatically raising prospects of lower oil demand over the coming months (especially as the FED will continue to tighten and worsen economic conditions). Second, the OPEC recently confirmed this same narrative about the declining demand when it slashed its demand growth forecast for 2023 from 2.6 million bpd to 2.3 million bpd. Third, a likelihood of more strategic petroleum reserves being released by the U.S. to dampen the price.
Besides that, our views are also supported by technical factors, pointing to liquidity issues in the overall market. We believe this tremendously increases the odds of a stock market crash. As if it was not enough, futures oil contracts manifest backwardation. Therefore, we voice a word of caution to investors.
Technical analysis - daily time frame
RSI, Stochastic, and MACD are bearish. DM+ and DM- performed a bearish crossover. Overall, the daily time frame is bearish.
Illustration 1.01
Technical analysis - weekly time frame
RSI and MACD are bearish. Stochastic is bullish. DM+ and DM- are bearish. Overall, the weekly time frame is bearish.
Please feel free to express your ideas and thoughts in the comment section.
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.
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