Crude oil was making lower highs since WTI failed to push above $130 after the surge at the beginning of March, as the conflict in Ukraine escalated. This was a sign that buyers were getting exhausted as they were offloading lower after every attempt to resume the uptrend.

At the bottom, a support zone formed around $95, where buyers were loading up their long positions. Last week though, crude oil made a higher high compared to the last time. That happened despite the deep contraction in Chinese manufacturing and services. That was a sign that perhaps the bullish trend was resuming again after the consolidation for several weeks.

US Crude Oil Daily Chart – Bears Resume Control

Let’s see how far down sellers can push the price

But the price has reversed down this week and today WTI crude slipped below $100, as fears of a global economic recession keep mounting. Central banks are hiking interest rates pretty fast which will have a negative impact on the economy besides the surge in prices, which will hamper demand. The EU is also deciding on Russian oil imports, which will likely be a positive decision. So, sellers have taken control this week.

FED’s Mester Comments: 

• I think we will need to go beyond neutral
• We might see a couple months of unemployment rate rising but it won’t be sustained
• Unemployment may need to rise, may get another negative GDP print
• Challenge for Fed is a large one
• There’s a lot of positive momentum in the economy
• We need to get mon pol at more neutral stance and then evaluate how much further is needed
• I will need compelling evidence that inflation is moving down
• We need to consider selling MBS
• The hiking pace we’re going now seems about right
• I don’t want to rule anything out on hikes for the second half of the year
• Aim is to use the tools we have to get demand in better alignment with supply
• It all depends on inflation’s path
• Fed’s task is not going to be smooth, unemployment may need to rise to bring inflation down

So, oil selling has picked up on the last few hours with equities remaining on the defensive. WTI is now trading below $100, which is the lowest since April 27. The pain point for the bulls is $93. A break of that would cut through the March/April double bottom.

US WTI Crude Oil Live Chart