WTI crude oil price remained under pressure last week as investors reacted to the rising supply glut fears. It dropped to $68.7, down by over 40% from its highest point this year, with technicals suggesting more downside ahead.
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Crude Oil Prices Fall Amid Supply Concerns
There are signs that the world will see a supply glut following the reopening of the Strait of Hormuz. Millions of barrels have started flowing through the Strait, and the trend is gaining momentum.
This oil is in addition to the millions of barrels that the world found when it was closed. For example, the war pushed Saudi Arabia to boost its oil flowing through the Red Sea, while the US, Canada, and Venezuela boosted their production.
At the same time, Iran is set to boost the amount of barrels it ships after the US ended its sanctions. The country is now racing the clock to ship as much oil as possible during the ceasefire. Estimates are that it has shipped over 50 million barrels since mid-June. OPEC oil production has also soared recently.
Top analysts have started to slash their oil price forecasts for the year. For example, Morgan Stanley, Goldman Sachs, and Citi have all reduced their oil forecasts for the year.
Still, there are some potential risks ahead. For example, oil inventories are substantially lower than historical levels, with the US still seeing a substantial drawdown.
The other risk is that Russia’s oil production is being affected as Ukrainian attacks intensify. Russia, one of the top producers, has started to import jet fuel and has placed limits on consumption in some places.
Another risk is that the US-Iran war may resume after the US concludes its 250th birthday celebrations. Iran may also launch strikes after the former Supreme Leader’s funeral.
WTI Price Technical Analysis
The daily chart shows that the WTI crude oil price has plunged in the past few months. It has slumped below the 78.6% Fibonacci Retracement level, confirming the bearish outlook.
WTI is close to forming a death cross as the spread between the 50-day and 200-day Weighted Moving Averages (WMA) has narrowed. The Relative Strength Index (RSI) has continued falling and moved to the oversold level. It also remains below the Supertrend indicator.
Therefore, the price will likely continue falling, potentially to the psychological point of $60. A move above the resistance at $72 will invalidate the bearish outlook.
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