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Crude Oil Repeats Pattern of Lower Highs, As WTI Heads for $100 Again

Posted Monday, May 2, 2022 by
Skerdian Meta • 2 min read

Crude Oil retreating lower

Crude oil has been quite bullish during the last two years, despite the coronavirus restrictions and lockdowns. US WTI approached the $100 level in February, while in early March we saw a jump to $130 almost, as the conflict in Ukraine escalated and the US administration decided to place sanctions on Russian oil.

Although, the price reversed back down as Russian oil still has a big market in China and India. Buyers have kept attempting to gain control and push higher, but they have failed and each time they are giving up faster, which is shown by the declining highs.

Over the weekend we saw a big dive in Chinese manufacturing and services due to lockdowns in the Shanghai area, which has hurt the sentiment for crude oil. The Chinese economy is a major consumer of energy, so the slowdown in the economy will keep the demand dampened for oil. Now US WTI is heading for $100 and it should soon break below this level, reaching the support zone around $94.

US Crude Oil Daily Chart – WTI Reversing After the Doji

Oil heading for $100 after reversing below $110 this time

OPEC on the other hand, continues to badly undershoot production quotas with the shortfall growing as the monthly quotas rise. Production rose just 40K bpd in April, well short of the 254K increase in production planned. That puts compliance at 164% compared to 151% in March. OPEC will meet this Thursday and is expected to add another 200k bpd with a delegate cited by Reuters saying there has been no change to the plan.

That means OPEC+ will agree to another 432k bpd oil output increase for June. The bloc is scheduled to meet on 5 May, so mark that in your calendars. That said, with the lack of enthusiasm to address the elephant in the room, OPEC+ meetings these days have been a real bore.

Most OPEC members are missing quotas with the most notable being Iraq and Nigeria. The collective shortfall is about 900k bpd, which virtually offsets the US SPR release. Another factor for the bearish oil lower today after a report cited ‘complications’ in a planned EU decision to phase out Russian oil by year-end. Crude is one of the most-compelling charts out there right now.