WTI oil prices are currently facing a complex interplay of factors.
While OPEC+ production increases are likely to put downward pressure on prices, supply disruptions, geopolitical tensions, and seasonal demand could continue to provide some support.
Analysts are divided on whether to expect a continued decline or a more volatile pattern for WTI oil prices in the coming months.
Americans are enjoying sub-$3 gasoline at the pump in several states.
But producers from Permian to the Bakken are facing rising pressure from investors and markets alike.
Low prices are forcing tough decisions on everything from rig count to buybacks, and the broader U.S. energy sector is again confronting volatility.
While crude futures fell today due to a report that indicates Saudi Arabia is advocating for more aggressive oil supply increases by OPEC+…
Russia/ Ukraine could be escalating,
In the Middle East, laggard nuclear talks between the U.S. and Iran pointed to Washington maintaining or even tightening its sanctions on Tehran’s oil industry… and
U.S. oil inventories shrank by 3.3 million barrels (mb) in the week to May 30, much more than expectations.
This is when we like watching the price charts.
While it seems that a powder keg of bullishness is about to blow up, it is the phase changes that keep us on the right side of the market with limited risk.
The July contract of WTI shows a breakout above a declining slope on the 50-DMA. That makes this a weak recuperation phase.
It also means that 50-DMA must hold offering a clearly defined risk.
We also see a move above $64 (if happens) as a bullish indication that the chart formation since the April lows suggests a bottom is in place.
Looking at USO the ETF, that too cleared the 50-DMA for a phase change to recuperation.
The slope on the 50-DMa is also negative.
What we see here are the Leadership and Real Motion charts.
Oil is trying to outperform the SPY and needs to stay in the lead.
Momentum shows us that the move above that 50-DMA is more robust. Nonetheless, you put this all together and:
- Both futures and USO must hold over the 50-dma
- The oil must gain momentum and leadership
- The risk if these levels cannot be held is clearly defined and extremely low given the geopolitical outliers
In other words, you will know soon enough if the bulls are right and even sooner if the bears come back in numbers.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
