As the global banking sector begins to recover from its initial shock, the markets have found some relief, and risk appetite is returning in the short
As the global banking sector begins to recover from its initial shock, the markets have found some relief, and risk appetite is returning in the short term. Additionally, there is optimism that Chinese demand for oil could reach record highs in 2023, providing further support for oil prices. Traders will now be watching to see if the recent rebound in Oil prices is the beginning of a more significant trend reversal or just a short-term recovery before a potential return to weakness in the longer term.
As would be expected, movements in WTI crude (US crude) have been bullish as risk sentiment remains positive, while today the EIA crude reserves showed a major drawdown. We have seen a rebound from oversold territory to now test the $74.35 level, where the 50 SMA stands on the daily chart. The longer-term trend for WTI Oil does however remain down and the 50 SMA rejected Oil on the first attempt.
WTI Oil H1 Chart – The 50 SMA Holding As Support for Now
Crude Oil backing off from the highs
So, we got the signal we were looking for after the bearish price reversal at $74.35 for new short entries with a long term sell Oil signal. In this scenario, $70 would become our downside support target, while traders might use a close above the reversal high as a stop loss indication.
If the WTI crude price kept moving higher and broke above the 50 daily SMA, the larger downtrend would be under threat. The price has retreated around 150 pips lower now and is finding support at the 50 SMA (yellow) on the H1 chart. So we might open a short term buy Oil signal for now, and if the 50 daily SMA rejects the price again we would open a long term sell signal.
Weekly US Petroleum Inventory from the EIA
- EIA crude oil inventories -7,489K barrels vs +92K expected
- Prior week’s inventories were +1,117K barrels
- Gasoline -2,904K meter cube vs -1,617K expected
- Distillates +281K barrels vs -1617K expected
- Refinery utilization +1.7% vs +0.6% expected
- Cushing -1,632K barrels
API data released late yesterday showed:
- Crude -6,076K barrels
- Gasoline -5,891K meter cube
- Distillates +548K barrels
It’s increasingly clear that the buildup in crude Oil inventories earlier this month was a result of speculative blowout on fears of a global recession. As the bank run ends, the bulls are picking up the game.
WTI
www.fxleaders.com