- Summary:
- Oil prices have been declining sharply in recent days, with mounting concerns over the global economy, but Middle East tension is weighing in.
Oil price bounced back up on Wednesday as supply-side worries weight in. West Texas Intermediate (WTI) traded at $74.53 after gaining 1.8 percent, while Brent crude was up by 2.2 percent to go for $77.77 per barrel. The commodity had recently been grappling with demand-side concerns amid weak economic data from the world’s two largest economies the United States and China. Oil prices went on to test two-month lows on Monday. That downtrend ignored the US inventory data that had declined more than expected for five successive weeks, affirming earlier projections of a spike in demand during the summer. The return to the upside is propelled by supply-side concerns as tension mounts in the oil-producing Middle East over possible military confrontation involving Israel, Iran and Hezbollah.
The focus now shifts to the release of US crude oil inventory figures on Wednesday, with forecast estimates projecting another higher-than-expected decline in stockpiles. Meanwhile, stock markets have bounced back strongly in the last two days, easing worries over a potential US economic recession.
WTI crude oil price momentum indicators
The momentum on the WTI price seems headed for the upside, as signaled by indicators on the 2-hour chart. First, the price has twice crossed above the upper band on the Bollinger Bands indicator. The band corresponds to the $74.71 mark, making that level a potential support level for sustaining the upside. Also, the Relative Strength Index (RSI) is at 57, confirming control by the buyers.
Support and resistance levels
On the 30-minute chart, the RSI shows control by the buyers. The upside will likely continue if the price stays above 74.30. That could see the commodity encounter the first resistance at 74.95, but extended control by the buyers could break above that level to take on the next barrier at 75.50. On the other hand, a move below 74.30 will favour the sellers to take control. That could see the first support established at 73.85. However, if they extend their control at that point, they could breach the support and invalidate the upside narrative. Also, that could lead to more losses to test 73.30.
