At the start of April, oil looked like it would be on for a rip higher after the surprise OPEC+ production cuts. And while that is still a factor in play, oil has instead fallen off quite significantly from that particular gap higher at the time - by over 13% to be exact.
The drop came as oil bulls failed to clinch a breakout above key technical levels with the 1 December high at $83.32 acting alongside the 200-day moving average (blue line) to keep a lid on price action. I would argue that the latter is the more important level and the drop back below $80 was a massive blow to the upside momentum.
Since then, we have seen oil fall back below its 100-day moving average (red line) and that once again puts sellers in control. The return of the banking turmoil yesterday was another big knock to buyers as the jitters are bringing back concerns surrounding global growth.
Even as demand conditions pick up and supply is expected to tighten, the chart isn't really a good look for oil at the moment.
It is looking poised for a test of $70 next and then the 200-week moving average, now seen at $66.85, will be the following key line in the sand for oil prices. The latter is what helped to stall the decline in March, before potentially looking towards the November 2021 low at $62.46 next.
At this point, it's about going with the flow and not fighting the market sentiment in the bigger picture. The factors impacting the oil market itself may be more bullish but if you're still a betting bull, it's best not to stand in front of a moving train and to just let it pass first.
The technicals are your friend and the levels highlighted above are ones that buyers could potentially lean on, so just watch for that.
