Gold 1857,425
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EURUSD 1,1458
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DJIA 35997,50
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OIL.WTI 80,395
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DAX 16088
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WTI crude oil has failed to consolidate above $85 a barrel, even though the price has approached this boundary three times since October. Moreover, a reversal pattern is emerging on the daily chart. What is the outlook for oil prices now from a fundamental and technical point of view?
OIL.WTI
A double-top pattern is emerging on the WTI daily timeframe in the $79-$85/bbl range. The trading week ended above $80, which now creates technical conditions for one of two scenarios.
The first is a breakout of the $79 a barrel level. Fixing under it would indicate that the reversal pattern has been triggered. The target for the decline, taking into account the potential of the model working out, will be in the area of $73-75.
The second is for WTI to return to the upside to draw a third top in a bearish reversal pattern. In this case, the price could recover to resistance in the $85 area and return from it to break support at $79 a barrel.
And what is happening on the fundamental backdrop in the meantime and are there any drivers for further declines in oil? Last week, the price fell on the back of a rising US dollar after a report on record inflation growth. Expectations that the Fed might accelerate its interest rate hike to curb rising price pressures have intensified in the market.
A second factor was rumours that President Joe Biden’s administration might release oil from the US Strategic Petroleum Reserve to lower prices. Such a form of state intervention would ease supply shortage fears, which had previously pushed the price to multi-month highs.
Looking ahead to the coming weeks, US dollar dynamics and President Joe Biden’s decision on supply expansion could have an impact on oil futures dynamics. But new factors could also emerge, cumulatively affecting supply and demand dynamics.
It is pertinent to remember here that price includes everything and technical patterns reflect the processes that take place in the market. Against this background, a hint of a trend reversal is worth taking into account. The only question is whether it will occur after the second, or after the third top.
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