USOil Tumbles to $58.49 as Supply and Trade Risks Swell — What’s Next?
WTI crude plummeted to a new low of $58.49 per barrel on Tuesday, undoing all of the previous day's gains as the markets fixate...
Quick overview
- WTI crude oil dropped to $58.49 per barrel, reversing previous gains amid US-China trade tensions.
- Geopolitical concerns are heightened by Trump's potential missile plans for Ukraine, impacting energy markets.
- Technical indicators show a strong bearish trend for WTI crude, with significant resistance levels preventing upward movement.
- Traders are advised to consider short positions below $59.00, targeting further declines in oil prices.
WTI crude plummeted to a new low of $58.49 per barrel on Tuesday, undoing all of the previous day’s gains as the markets fixate on the renewed strain in US-Chinese trade relations.
Treasury Secretary Scott Bessent has confirmed that a Trump-Xi meeting is still being planned in South Korea, however, Trump has also floated the idea of sending long-range Tomahawk missiles to Ukraine, raising concerns of a potential energy market shake-up due to the increased geopolitical tensions.
With the situation in the Middle East becoming less volatile – which in turn has reduced risk premiums – and despite a stable supply and demand picture, oil remains capped in price.
WTI Crude Oil Technicals Signal A Long Lasting Down Trend
From a chart perspective, WTI crude is stuck beneath a descending trendline that’s anchored from that high of $62.89 – this reinforces the overall bear trend.
And just to add insult to injury, we’ve got a three black crows pattern forming a trio of bearish candles that really drives home the point that there is a lot of selling pressure out there. Not to mention, crude just can’t seem to get back above the 0.236 Fibonacci retracement at $59.35 – so the bears are still firmly in the drivers seat.
The 100-period SMMA at $61.89 and the 61.8% retracement at around $61.12 both form a serious resistance band that bulls just can’t seem to break through – even though they’ve had plenty of chances to do so. When it comes to momentum, the RSI is reading in at around 29 which means it’s over sold – but unfortunately we don’t have a clear bullish divergence or any kind of reversal candle in sight. Any short-term bounce is likely to stall out around the $60.00-$60.50 mark.
USOIL Trade Idea: Look to Shorts
Here’s a trade idea that would be suitable for traders who are looking to play it safe:
- Consider shorting below $59.00 – and put your stop-losses in at $60.50 or higher.
- Your target would be $57.40 to start with – and then if the bearish momentum keeps on going, try aiming for $56.60.
- If you want to enter the trade a bit more cautiously – then wait for crude to pull back towards $60.00 before looking for a bearish engulfing or spinning top near that resistance zone.
The oil price remains technically pretty weak given the overall bearish trend behaviour. While the over sold reading is a good sign that we might see a temporary pause in the price action – the overall bearish bias still persists until we see crude break above that resistance zone with some real conviction.
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