- WTI crude oil takes offers to refresh intraday low, drops for the third consecutive day.
- Clear downside break of key HMAs, sluggish oscillators favor the black gold’s further declines.
- One-week-old horizontal support can prod energy bears amid nearly oversold RSI, looming bull cross on MACD.
WTI crude oil remains pressured for the third consecutive day after reversing from a one-week high, taking offers to refresh intraday bottom around $71.10 amid early Friday.
In doing so, the energy benchmark justifies the previous day’s downside break of the 100 and 200 Hourly Moving Averages (HMAs). Adding strength to the bearish bias about the black gold are the sluggish conditions of the MACD and RSI indicators, also known as the oscillators.
It’s worth noting that a one-week-old horizontal support area surrounding $70.70-60 joins nears the oversold RSI (14) line to restrict the immediate downside of the WTI crude oil.
Following that, the $70.00 psychological magnet and $69.50 may entertain the Oil sellers before directing them to the recently flashed multi-month low of around $64.30.
On the contrary, a convergence of the 200-HMA and a 50% Fibonacci retracement level of the Oil Price weakness from April 24 to May 03, near $71.70, appears a tough nut to crack for the energy buyers to convince the markets.
Even so, a successful break of the 100-HMA and 61.8% Fibonacci retracement level, also known as the golden Fibonacci ratio, respectively near $72.55 and $73.50, becomes necessary for the WTI bulls to retake control.
WTI crude oil: Hourly chart
Trend: Limited downside expected
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Oil prices have been gaining momentum the past few months, driven by rising demand from emerging markets and tight global supplies. However, the latest analysis of WTI crude suggests that oil bears are eyeing a downside towards $70.70-60 range in the coming weeks.
Oil bulls were hoping for a strong recovery in global oil demand that would push prices back up towards the pre-COVID levels. However, some concerns over a lack of additional stimulus in the US and signs of faltering reflation globally have weighed on prices. As such, the WTI oil prices have been trading within a $71-72 range over the past few days.
Analysts suggest that if prices break below the $70.70-60 range, then we can expect further downside in the near-term. This could lead to a considerable fall in prices, as this range has acted as a strong support throughout the year.
The main catalyst behind the downfall in crude prices is the resurgence of the pandemic in some of the biggest markets such as India and Brazil. This has prompted worries over the potential oversupply situation caused by the decrease in crude demand in the near-term.
In addition, there are some uncertainties in the global markets with the US Presidential election fast approaching. A Joe Biden victory could mean additional stimulus to the US economy and could prove to be bullish for oil prices. However, the outcome of the vote is not certain and this could have a major impact on the outlook for oil prices.
Overall, analysts expect oil prices to remain choppy in the near-term and they suggest any downside towards the $70.70-60 range should be seen as a possible entry point for investors looking to gain exposure to oil prices. However, any further downside could increase the pressure on prices and lead to further losses in the near-term.
