Whilst it’s not an outright promise, Saudi Arabia have seemingly thrown the West a bone. This will be well received by Western leaders given inflation – and inflation expectations – remain eye wateringly high, and central banks try to raise rates at the risk of tipping their economies into a recession. More supply essentially soothes some of those inflationary fears, even if there is a lot more work to do when it comes to fighting inflation.
It’s unlikely to see any major revisions to today’s OPEC meeting where output is expected to be raised by 432k bpd. But the fact the idea has been floated has seen bearish momentum accelerate on oil prices as traders fear fresh supply could be coming. WTI saw a false break above the March high on Tuesday, and we continue to suspect many of the supporting factors of oil’s rally have been priced in, meaning the path of least resistance over the near-term is lower.
View yesterday's analysis: Oil slips on the last day of (another good) month ahead of OPEC
We can see on the daily chart that the potential retracement we warned of yesterday is now underway. If we have seen a major top then trend support form the December low is a level to keep an eye on for potential support. 110 also makes a likely interim support level.
Momentum has accelerated lower on the hourly chart and close to testing a key support zone just above 110, which comprises of the monthly pivot point and trend support. Perhaps we’ll see a bounce form this level but, should we see evidence of a lower high after any such bounce, we’ll be looking for a break lower. A break below 110 assumes bearish continuation.
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