WTI is at a crossroads as investors weigh both sides of fundamentals


  • Oil markets remain at a crossroads, with a strong supply-side offset by growing concerns about demand. 
  • The 20, 50 and 200 Experiential Moving Averages are being whipsawed.

US oil prices were lower by -1.05% on a spot basis having travelled between $56.49bbls and $57.55bbls while the market consolidates with WTI now sat at a crossroads. There is a strong supply-side narrative but global demand concerns are undermining the upside.

"With OPEC+ keeping the taps shut, rising Middle East geopolitical risks and sharp reductions in Iranian export flows, along with lower US inventories, will all contribute to the upside potential for crude. In fact, the seizure of a tanker shipping Iranian crude highlights that the US maximum pressure regime on Iran is being more strictly enforced. This follows strong words from the President, warning Iran that threats can "come back to bite" in response to their commitment to enriching more uranium," analysts at TD Securities explained. 

Meanwhile, the OPEC cuts may not be enough to prop up prices if trade progress between the US and China deteriorates again. Elsewhere, the analysts at TD Securities explained that a breakthrough on a disagreement on oil fields in the so-called Neutral Zone shared by Saudi Arabia and Kuwait could bring back 500k bpd of production capacity, but we don't foresee any oil immediately flowing out of the field given that Saudi Arabia's compliance with the cartel's supply curtailment agreement has been far deeper than what is required.

WTI levels

From a technical standpoint, WTI continues to trade between the 38.2% Fibo of the daily swing lows and highs. The 20, 50 and 200 Experiential Moving Averages are being whipsawed and there is room to the 60 level on the top side while below the weekly lows at 56.77, the 52 handle and then the 14th Jan 50.41 lows ahead of the 26th November lows at 49.44 are all in the bear's pipeline. 

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