Oil Price Update: WTI and Brent Remain Under Pressure as Recessionary Fears Weigh

WTI, BRENT PRICE, CHARTS AND ANALYSIS:

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WTI FUNDAMENTAL OUTLOOK

Crude Oil faced renewed selling pressure this morning as recession risks have once again reared their ugly head. WTI printed a low of $64.40 in the European session before a bounce for risk assets dragged oil higher, trading around the $67.00 handle at the time of writing.

Last week saw Crude Oil prices drop 13.55%, its largest drop since February 2020. A sign of the fear which engulfed markets last week from the continuing Banking sector fallout. The decline this morning was a further sign of the ongoing pessimism around potential demand concerns and recessionary risks resurfacing. Over the weekend the Federal Reserve announced on Sunday that the major Central Banks (SNB, BoC, BoE, BoJ, ECB) would take ‘coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements.’

Last week we heard comments from Saudi Energy Minister Prince Abdulaziz bin Salman who discussed the G7 price cap on Russian Oil and tighter global oil production capacity. Prince Abdulaziz reiterated the need to stick by the OPEC decision in October 2022 to cut production by 2 million bpd until the end of 2023. However, given the recent decline in prices speculation continues to rise as to how low will OPEC want oil prices to go before stepping in once more?

Another point of interest is that Oil prices are currently trading just below the range initially earmarked by the US to refill the Strategic Petroleum Reserve (SPR). The US is expected to see further declines in the SPR between April 1-June 30 as prices remain favorable to replenish the reserves. On Friday comments from US Energy Envoy Hochstein claimed that President Biden is committed to replenishing the SPR, which could in theory boost oil prices. The question is will such a boost be sustainable given current market conditions?

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BRENT CRUDE UPDATE

Bent Prices have been on the exact same trajectory this week as WTI as it tapped the $70 a barrel psychological level which lines up with the 200-day MA. Facing the same challenges, the $70 a barrel hurdle will remain key if we are to see further downside with a daily candle close below opening up potential support tests of the $65.60 and $62.60 levels respectively. On the Upside resistance at the $75.30 handle will be key if we are to see a sustained recovery moving forward.

TECHNICAL OUTLOOK

From a technical perspective, WTI broke the 2022 lows last week printing a fresh multi year low this morning. Last week on Thursday saw us print a doji daily candle close which hinted at a potential recovery from the $68 a barrel mark. However, the return of market pessimism on Friday derailed any such hopes as WTI closed the week just above the $65 a barrel Mark.

This morning saw quite an aggressive bounce of the daily low around $64.40 as risk sentiment showed signs of improvement heading into the US open. Today’s daily candle close will be interesting as the RSI is also in oversold territory at the moment. However, any further moves are likely to depend on overall sentiment improving at this stage.

WTI Crude Oil Daily Chart – March 20, 2023

Source: TradingView

Written by: Zain Vawda, Market Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda