Oil holds on key technical support

Oil holds on key technical support

A late reversal yesterday saw oil avoid a technical breakout on the daily chart as buyers avoid a drop below the support region around $92.96 to $93.56 and more importantly the moving average. of 200 days (blue line) at $94.16 currently.

It is difficult to square the recent volatile declines in oil as the market remains tight. But the global economic outlook is now clouded by recession risks and China’s lack of confidence is no relief. Yesterday’s low came in at $90.58 and that essentially removes the rise of the Russia-Ukraine conflict.

From a structural perspective, it’s hard not to like the fundamental backdrop of oil. Global inventories are lower than ever and, despite global economic headwinds, demand conditions will eventually pick up or at least not be too hampered by cooling growth.

But from a trading standpoint, timing is everything and oil now holds at the key support levels noted above.

If the buyers can hold on, it reaffirms the support region highlighted above as a good platform for a bounce to the upside. However, with markets elsewhere adjusting their focus towards a downturn, it could build less strong conviction for oil to actually chase $120 to $130 again, at least for now.

Alternatively, a technical break to the downside will be a huge blow to the bulls despite everything else. That will draw attention to minor support around $88.50 next, before potentially sliding further towards $80.00. That being said, if we see such a run in oil, I would say it will be a great bargain, one not to be missed.

Samuel Edwards
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