Oil prices are losing steam ahead of the US Federal Reserve decision tomorrow. Recession fears have not only sent stocks into a bear market, but capped the surge in oil prices recently.
Opec delegates and industry sources expect the oil demand to drop to 2 million barrels per day in 2023, from 3.36 million in 2022, due to demand destruction by the spiking fuel prices, according to Reuters. From a technical perspective, the crude price may face short-term downside pressure, as shown in the 4-hourly chart, with a bearish divergence forming ahead, though the long-term uptrend is still intact.
Crude Oil West Texas (WTI) - Cash / 4-hourly chart(Click to see the enlarged chart)
The divergence moves between the market price and oscillators (MACD, RSI, and Stochastic) provide a bearish element of a potential corrective pullback in the oil price, or a bearish divergence pattern, where the price is trending up but the oscillators are trending down. This tells us that the upside momentum is fading off and requires a corrective retreat. At the same time, two MAs are converging for a death cross, which is also a sell signal, adding to the probability of a downside price movement.
If the bearish divergence has been successfully established, WTI may firstly retest yesterday’s low at 117.12 (Fib. 61.80%), then 112.62 (Fib. 50.00%). Otherwise, if the price reversed the downtrend and clears the intraday resistance at 120. 50, where the MAs converged, it may continue the uptrend and hit the recent high at 123.94.
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.