Oil Value Inclined to Giant Pullback as RSI Divergence Persists

Oil Value Speaking Factors

The worth of oil retains the sequence of decrease highs and lows from earlier this week amid a larger-than-expected growth in US crude inventories, and oil costs could face a bigger correction because the Relative Energy Index (RSI) falls again from overbought territory to increase the downward development established in February.

Oil Value Inclined to Giant Pullback as RSI Divergence Persists

The worth of oil seems to be going through a near-term correction after taking out the 2019 excessive ($66.60), and crude could proceed to provide again the advance following the OPEC Joint Ministerial Monitoring Committee (JMMC) assembly as US crude inventories widen for the third consecutive week.

US stockpiles elevated 13.798M within the week ending March 5 versus forecasts for a 0.816M rise, with the info print largely reinforcing the recent forecast in OPEC’s most up-to-date Month-to-month Oil Market Report (MOMR) because the group warns that “prolonged lockdowns and the re-introduction of partial lockdowns in quite a few international locations has resulted in downward revisions to 1H21 projections.”

On the identical time, the up to date figures from the Power Info Administration (EIA) confirmed US crude manufacturing largely recovering from the weather-related disruptions from earlier this yr as weekly output elevated to 10,900Okay from 10,000Okay within the week ending February 26, and it stays to be seen if OPEC and its allies will regulate the vitality market all through 2021 as Saudi Arabia stays on monitor to scale back provide by 1 million b/d till April.

In flip, the value of oil could face headwinds forward of the following OPEC JMMC assembly beginning on March 31 because the Relative Energy Index (RSI) continues to diverge with value and nonetheless tracks the downward development carried over from the earlier month, however the broader outlook stays constructive as crude continues to trace the ascending channel established in November.

With that stated, the decline from the month-to-month excessive ($67.98) could grow to be an exhaustion within the broader development fairly than a change in market conduct as US output nonetheless holds round its lowest degree since 2018, and the value of oil could proceed to exhibit a bullish development as OPEC and its allies seem like in no rush to revive crude manufacturing.

Oil Value Every day Chart

Supply: Buying and selling View

• Have in mind, crude broke out of the vary sure value motion from the third quarter of 2020 following the failed try to shut under the Fibonacci overlap round $34.80 (61.8% growth) to $35.90 (50% retracement), with the value of oil taking out the 2019 excessive ($66.60) as each the 50-Day SMA ($56.20) and 200-Day SMA($44.76) nonetheless replicate a optimistic slope.
• The worth of oil could proceed to trace the ascending channel established in November because it trades to a recent yearly excessive ($67.98) in March, however latest developments within the Relative Energy Index (RSI) warns of a near-term correction because the oscillator continues to diverge with value to retain the downward development carried over from the earlier month.
• A break/shut under the Fibonacci overlap round $62.70 (61.8% retracement) to $62.90 (78.6% growth) brigs the $61.80 (50% growth) area again on the radar, with the following space of curiosity coming in round $59.40 (38.2% growth), which largely strains up with trendline help.

— Written by David Tune, Forex Strategist

Observe me on Twitter at @DavidJSong