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Crude Oil quickly bounced $1.50 higher

Crude Oil Testing the 200 SMA As Support, After the Bearish Reversal

Posted Wednesday, October 12, 2022 by
Skerdian Meta • 2 min read

Crude Oil made quite a comeback in the last two weeks after falling to $76 lows. In the first week, the sentiment improved as the USD retreated, but then the bullish momentum continued, despite the reversal in the USD and the decline in all risk assets. Oil was continuing to push higher, reaching $93.50s, but then reversed lower at the end of last week and the beginning of this one.

This looks like the beginning of a bearish reversal, particularly as the price falls below the 50 SMA on the daily chart today. On the H4 chart displayed below, US WTI crude fell below the 20 SMA (gray) which turned into resistance, and now sellers are testing the 200 SMA (purple)so let’s see if they can break below it.

Crude Oil H4 Chart -Can the 200 SMA Hold As Support?

The 20 SMA turned into resistance immediately 

OPEC on Wednesday cut its 2022 forecast for growth in world oil demand for a fourth time since April and also trimmed next year’s figure, citing slowing economies, the resurgence of China’s COVID-19 containment measures and high inflation. Oil demand will increase by 2.64 million barrels per day (bpd) or 2.7% in 2022, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, down 460,000 bpd from the previous forecast.

The lower demand outlook gives additional context for last week’s move by OPEC and its allies, known as OPEC+, to make their largest cut in output since 2020 to support the market. The United States criticized the decision. Reminder that this is stale data/commentary, not only because of the OPEC meeting last week, but more importantly, any and every Oil desk worth their salt has had this report on their desk since the early hours

After the dip in prices, this was an interesting comment from deputy Treasury Secretary Wally Adeyemo:

The President wants more investment in hydrocarbons. He’s called for it. We’re seeing more of it. Right now we’re on pace — in 2023 — to have the largest level of production in history. We want to do more. What the President has said to the Secretary of Energy is that if there are any good ideas out there that are coming from the industry, please bring them forward because we want to produce more.

The industry wanted to build Keystone XL. Maybe bring that back rather than dropping sanctions on Venezuela?

US WTI Crude Oil Live Chart

WTI
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