Crude Oil prices tumbled last week on many factors, which put Oil prices at risk of further declines ahead, as there is no new catalyst to support the uptrend anymore.
Looking at the chart of Brent and WTI Crude Oil, we can see that it managed to trade within a tight range since the beginning of this year, well below key resistance areas.
Brent crude struggled to break above 57.0 resistance area, which held since December of last year until today while Moving Averages were still positive on most time frames until last week.
WTI Crude has the same story, but of course different levels, it struggled to break above 54.50 resistance area, which also held since Mid-December of last year. Even though WTI outperformed Brent, in the end, it gave up and turned lower, posting new lows for this year.
The Technical Indicators were heavily overbought on most time frames, whether on Daily, Weekly and Monthly, which kept the chances higher for a notable retracement ahead.
Moreover, both crudes managed to break the lower line of the sideways trend as shown on the chart, which keeps the bearish outlook unchanged for the time being, meaning that there is a higher possibility for another leg lower ahead.
The majority in the market is blaming the US Crude Oil inventories for the recent drop. This might be true. However, OPEC also plays a significant role.
The Us Crude Oil Inventories posted the longest weekly surplus since more than two years, rising for 9th consecutive weeks in a row, which was one of the factors for the recent decline.
Despite the fact that last week the inventories posted the first deficit in 9 weeks. Yet, it was just a slight deficit, to the point that the prices did not react much to it, which keeps the risk for more declines ahead.
As for OPEC, they sent out many reports and remarks by many of its members. However, none of these reports or remarks were positive for the prices, including the talks about the production cut deal which expires in June of this year.
Many OPEC and Non-OPEC members noted that there is no talk or negotiations about extending the deal.
All the factors above just doesn’t support the prices anytime soon. What Crude Oil need is new and genuine catalysts, such as global growth and demand.
Lack of new catalyst would put more pressure on the prices in the coming days, as the deal that has been signed in December is already priced in a long time ago.
With lack of fundamentals and new catalysts, technical charts will be our only way to predict the upcoming move.
Both crudes are trading above their 50 DAY MA once again, after breaking below that MA last week, which eases the bearish outlook. However, this is likely to be limited.
Yesterday’s daily candle is a bearish shooting star, which keeps the bearish outlook unchanged. Yet, a break through that support for both crudes is needed in order to clear the way for further declines ahead.
What’s more interesting is that the stochastic indicator has turned higher quickly and now nearing overbought, while the RSI indicator remains around 30’s.
For the time being, the 61.8% Fibonacci retracement stands around 49.27 for Brent and WTI Crude spiked right from 61.8% Fibo which stands at 47.18.
Traders need to watch those levels very carefully in the coming days, as a break through those levels, would clear the way for another leg lower, probably toward 46.50’s in WTI Crude and 49.27 in Brent Crude.