Crude oil outlook: WTI bounces off lows but selling could resume

WTI crude oil managed to bounce $1 off its earlier lows to trade around $76.00 after earlier dipping to $75.00 support level. That dip was bought, supported in part by ongoing risk-rally with equity indices also still maintaining their bullish structure. With China’s improving economic conditions, demand concerns have reduced and in the short-term there is little risk of an oil glut forming, but the slightly longer term outlook is a bit murky with the potential for another supply war to emerge between US shale and OPEC+ producers.

Longer term crude oil outlook bleak amid potential for US supply surge

"We will drill, baby, drill" is what Trump promised yesterday, and this had an immediate influence on oil prices. Trump emphasized a push for increased domestic oil production, aiming to lower global energy prices by boosting supply. Let’s see if he will be able to achieve this goal. The lack of a more meaningful drop can be explained away by the fact this was something he had already announced. Still, regardless of what prices do in the short-term, the long-term outlook is bearish: The expected increase in US shale production, combined with the OPEC potentially returning withheld supplies, means the upside should be capped. Demand growth may not keep up with the potential increase in global supplies.

Crude oil outlook: WTI technical levels to watch

WTI has been trending downward over the past few days, breaking a few key support levels that have now turned into resistance, such as the area around the $77.00 mark.

Source: TradingView.com

Earlier, prices dipped to test the first significant support zone near $75.00, which triggered a bounce. Here, a short-term bullish trend line and prior resistance met the psychologically important level. A technical bounce made total sense.

At the time of writing, WTI was testing the broken support zone in the $76.40 to $77.15 range. The question is: will sellers re-enter the market at this level or await a deeper retracement?

With Trump's bearish oil policies at the forefront, this could reignite selling pressure again. Tactically, our crude oil outlook will turn bearish in the event WTI breaks and closes below the $75.00 handle today.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.