WTI Crude Oil Technical Analysis - Time for a pullback

Sep 6, 20232 min read

While the global economic outlook appears increasingly precarious due to ongoing deterioration in economic indicators from the world's largest economies, Crude Oil is showcasing resilience driven by supply-side dynamics. OPEC+ is making concerted efforts to uphold prices above the $70 mark, and there's speculation in the market that they may target prices near the $100 range.

Just recently, Crude Oil experienced a surge in prices following Saudi Arabia's decision to extend voluntary production cuts until December. It's worth noting that the market had already priced in such a development in preceding weeks.

On the technical front, examining the WTI Crude Oil chart on a daily timeframe, we observe a complex interplay of factors. At present, Crude Oil appears to have some support. However, the prospect of elevated energy prices amidst a fragile global economy may exert pressure on demand, potentially leading to a sell-off, particularly if economies slip into recession.

Examining the daily chart of Crude Oil, a significant development unfolds as the commodity successfully breached the crucial $83 resistance level once more. This time, the price journeyed to fresh highs, driven by a potent and rapid upward momentum. However, it's worth noting that this recent surge appears overextended.

Indeed, the current price position is considerably distant from the blue 8-day moving average. Typically, in such scenarios, one can anticipate either a pullback towards the moving average or a period of consolidation preceding the next significant move.

Furthermore, an interesting observation emerges as the most recent upward leg exhibits divergence with the MACD indicator. Such divergence often signals a diminishing momentum, which can precede pullbacks or even reversals.

Considering risk management strategies, potential buyers might opt for a more cautious approach. Waiting for the price to retrace to the trendline and the former resistance, which now acts as support, could offer a more favourable entry point. The ultimate target, in this case, remains the $93 level.

Switching to the 4-hour timeframe for more granular analysis, one can delve deeper into the dynamics at play in the Crude Oil market.