Oil turned extremely bullish in early March due to the conflict in Ukraine, but since the middle of June, sellers have been in control, as the global economy heads into recession. But. there seems to be more to the easing of Oil prices than just recession fears. Oil dropped below $100 per barrel last week, and returned back below that level earlier this week, closing the week down there.

The market mood cooled and has moved into neutral territory as indicated by the futures positions, particularly the net-length exposure by non-commercial participants. We believe that the change in sentiment should be described rather as disappearing optimism, not increasing pessimism. With oil prices back at pre-March levels, another interpretation is that the risk premium induced by this geopolitical shock has dissipated.

This week the US weekly Oil market statistics showed increasing signs that the market’s supply situation has started to improve. Crude oil and oil products in storage came at 8.2 million last week and 3.3 million this week, indicating that the tightness would ease eventually. Domestic production expanded robustly within the shale business, while demand stagnated, as high prices at the pump seemed to dent consumption.

 USD WTI Oil Daily Chart – The 200 Holding As Support

Crude Oil bouncing off the 200 daily SMA

Oil was finding support at moving averages during the uptrend and they have been slowing down the retreat as they provide support again. Although, the ones that have been broken are turning into resistance which is a bearish signal. But, the 200 SMA (purple) held as support on Thursday and a bullish reversing chart setup is forming now on this timeframe.

US WTI Oil Weekly Chart – The 50 SMA Providing Support

Stochastic is now oversold too

On the weekly timeframe, the 20 SMA (gray) has been broken, but the 50 SMA (yellow) held on the first attempt and the price retreated higher. Besides that, the stochastic indicator has just reached the oversold levels here which means that Oil is oversold on the weekly chart. So, there’s a chance that we might see a retrace higher before the decline resumes again, technically speaking.

Although fundamentals remain bearish, as Bloomberg said in its weekend report that Iran has cut its crude prices, “to match Russian Urals grade” Oil price.

• Iran is being forced to discount its already cheap crude even more as a top ally gains a bigger foothold in the key Chinese market.
• China has become an important destination for Russian oil as Moscow seeks to maintain flows following the fallout from the conflict in Ukraine. That’s led to increased competition with Iran in one of the few remaining markets for its crude shipments, which have been significantly curtailed by US sanctions.

Besides that, the deep Saudi Oil insider, the “oil whisperer” said early this week that raising production is easy. Ibrahim al-Muhanna was the right-hand man to four of the kingdom’s oil ministers. He started his own consulting firm in 2017.

• “The market should not worry” about Saudi Arabia’s ability to hike output to meet growing demand, he said in an interview with S&P Global Commodity Insights.
• “What’s really good about Saudi Arabia is they have the system. The system meaning pipelines, storage, export facilities. When you have all these things, and of course good management, good engineering, you don’t have any major problems [raising production].”
• there should be no doubt that Saudi Arabia can fulfill its quota and go beyond, if called upon, Muhanna said.
• “11-12 million b/d can be done,”

US WTI Crude Oil Live Chart