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Uptrend Appears Weak, but Structure Suggests Positive Outlook
Commodity
Economic
Summary:
The tensions between Russia and Ukraine have provided support for WTI crude oil, as the potential for nuclear strikes has raised concerns about the output from producing countries. However, any actual attacks could still generate a significant influx of safe-haven capital, thereby exerting overall pressure on risk assets.
Buy
TradingWTI
EXP
69.820
Entry Price
75.500
TP
66.300
SL
70.060 +1.076 +1.56%
0
Point
Flat
66.300
SL
CLOSING
69.820
Entry Price
75.500
TP
Fundamentals
WTI crude oil has paused after a significant increase on Monday, supported by heightened risk perceptions stemming from the Russia-Ukraine conflict. Reports indicate that Ukraine launched a U.S.-supplied long-range missile, successfully hitting an ammunition depot.
Production at Norway's Johan Sverdrup oil field resumed yesterday after a temporary shutdown, which has diminished the upward momentum in oil prices. Although the escalation of the Russia-Ukraine conflict suggests that the required risk premium may be higher than previously anticipated, we still expect the deteriorating balance of crude oil supply and demand to dominate, ultimately driving prices lower in both the near and long term.
Meanwhile, despite significant production cuts by OPEC and its allies, and ongoing geopolitical tensions, WTI crude oil prices have fallen approximately 5.3% year-to-date due to weakened demand. Voluntary production cuts have merely prevented a supply surplus without benefiting oil prices.
Looking ahead to 2025, there are indications that a supply surplus may be imminent, while global crude oil demand is unlikely to experience robust growth. Overall, the trajectory of the crude oil market next year will largely depend on the strength of China's demand for oil.
Technical Analysis
WTI crude oil is currently forming lower highs and has found support at US$68.46. However, it remains within a descending triangle consolidation in the 4H timeframe, and the price has yet to test the triangle's resistance.
A breakout above the resistance level at US$71.30 could trigger a rebound equivalent to the height of the triangle pattern, which spans approximately US$7. However, the 100 SMA is below the 200 SMA, indicating that the resistance level is more likely to hold rather than be breached, potentially leading to a decline in oil prices back to the support level.
Increased selling pressure could even result in a breakdown below the triangle's bottom, causing oil prices to drop by a magnitude similar to that of the triangle formation.
The stochastic indicator has already indicated overbought conditions or buyer exhaustion, suggesting that a downturn would confirm the return of bearish sentiment. There is still considerable room for this oscillator to decline before reaching the oversold zone that reflects bearish exhaustion.
However, the relative strength index has some upward potential before reaching the overbought zone, indicating that bulls may be pausing. Therefore, while a bullish sentiment is in play, prices may continue to follow through.
Trading Recommendations
Trading Direction: Buy
Entry Price: 68.80
Target Price: 75.50
Stop Loss: 66.30
Deadline: December 5, 2024 23:55:00
Support: 69.11, 68.46, 67.64
Resistance: 68.87, 70.35, 70.66
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