A late reversal yesterday saw oil stave off a technical break on the daily chart, as buyers fend off a drop below the support region around $92.96 to $93.56 and more importantly the 200-day moving average (blue line) at $94.16 currently.
It's tough to square the recent volatile drops in oil as the market remains tight. But the global economic outlook now is clouded by recession risks and the lack of confidence from China isn't soothing. The low yesterday hit $90.58 and that essentially wipes out the surge higher from the Russia-Ukraine conflict.
From a structural perspective, it's tough not to like the fundamental backdrop for oil. Global inventories are as low as ever and despite headwinds to the world economy, demand conditions are eventually going to recover or at least not be too hampered by cooling growth.
But from a trading point of view, timing is everything and oil is hanging on now at key support levels pointed out above.
If buyers can hang on, it reaffirms the support region highlighted above as being a good platform for a rebound to the topside. However, with markets elsewhere tuning their focus towards a recession, it could make for less strong conviction for oil to really chase $120 to $130 again - at least for now.
Alternatively, a technical break to the downside will be a massive blow for the bulls despite everything else. That will draw the focus towards minor support around $88.50 next before potentially slipping further towards $80.00. That said, if we do see such a run on oil, I would argue that it will be a massive bargain - one not to be missed.