US Cured Oil Price Breaks Key Support Levels, Threatening Further Losses
Breaking Below Crucial Support Levels
The oil price has recently experienced a significant decline, breaching key support levels. It has decisively broken below the May 22 lows of $70.65, as well as the $69.40 lows from May 15. This downward movement signals potential further losses. The only remaining barrier before further downward movement is the 200-week Simple Moving Average (SMA). If the oil price breaks below this level, it could lead to additional weakness, potentially reaching the year-to-date (YTD) lows of $64.31.
Reigniting the Downtrend with Lower Targets
A break below the YTD lows would reignite the ongoing downtrend, introducing new downside targets. The next significant target lies around $62.00, which aligns with the trough lows observed in 2021. Following this level, there is another layer of support around $57.50.
US Cured Oil Breaking the Bearish Trend
To challenge the dominant bearish trend, the oil price needs to regain strength and surpass the $74.70 highs from May 24. Achieving this milestone would introduce doubts regarding the bearish sentiment. If a break above this level occurs, a potential target in the $79.70s comes into play. This level holds significance as it aligns with the 200-day SMA and represents the primary trendline for the bear market. Thus, breaching this resistance level becomes even more critical.
Potential Bottom Formation and Uncertainties
The formation of a long hammer Japanese candlestick pattern at the May 4 lows, which also coincide with the YTD lows, suggests that the oil price may have found a strategic bottom at that level. This pattern implies a potential reversal in the downward movement, providing hope for bullish traders.
However, several uncertainties loom over the oil market. The doubts surrounding the passage of the deal to raise the US debt ceiling in Congress have caused concern. A group of rebel Republicans and some Democrats have expressed their intention to vote against the deal, which may result in the US defaulting on its obligations. This scenario would create financial chaos and negatively impact oil demand, leading to lower prices.
Additionally, the depreciation of the US Dollar could act as a positive factor for oil. Since oil is primarily priced in USD, a weakened dollar often translates to higher oil prices. Nevertheless, the outcome of OPEC+'s next meeting remains uncertain, and mixed messaging from key members adds to the overall opaque outlook.
Current US cured Oil Price Levels and Outlook
As of the time of writing, WTI Oil is trading in the upper $67s, while Brent Crude Oil is in the lower $72s. The oil market faces significant challenges as it grapples with breaking key support levels and the potential for further losses. The outcome of the US debt ceiling vote, uncertainties surrounding OPEC+'s next meeting, and mixed messaging from key members contribute to the overall uncertainty and unpredictability of the oil market. Traders and investors will closely monitor the developments and price movements to navigate this dynamic landscape effectively.
D1 chart outlook
