Crude oil moved higher, but will it reverse its downtrend?
Crude oil rebounded on Wednesday, gaining 2.16% and closing near its recent local highs. The market advanced on the back of a weaker USD and uncertainty surrounding Russia-Ukraine ceasefire talks. However, overall, crude oil remains in a sideways pattern following recent declines and a breakdown below the October-December lows.
Today, oil prices are down 0.5%, retracing some of yesterday’s gains and extending their consolidation. While this appears to be a consolidation within a downtrend, the market may still be in the process of forming a bottom.
Oil Trading Near November-December Lows
Quoting yesterday’s analysis, “The daily chart of crude oil futures is still showing a clear downtrend that began with the January 15 local high of $79.39. However, the decline appears to be pausing near last September’s lows, which could be a positive sign for oil bulls.”
Inventories: Lower Than Expected
The Crude Oil Inventories report, released yesterday, showed a build of 1.4 million barrels—below the expected 2.1 million. This initially pushed prices higher, but the rally quickly lost momentum.
Conclusion
Crude oil continues to consolidate, but yesterday’s advance brought the market closer to a potential bullish breakout. Resistance remains near $68, marked by recent highs.
Is this a good time to open a short position? I don't think so - the market is approaching strong medium-term support levels and could move sideways or rebound.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil advanced but remains in consolidation.
- In my opinion, the short-term outlook is neutral, and no speculative positions are justified from the risk/reward point of view.
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Thank you.
Paul Rejczak,
Stock Trading Strategist