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WTI Crude Oil Mid-term Downtrend Persists

12/9/2022 1:15 PM

Oil is showing the most significant weekly drop in the last few months amid concerns about a recession in the global economy in 2023, one of the main reasons for which will be the tightening of monetary stimulus by the US Fed. At the next meeting of the regulator on December 14, the interest rate is likely to be raised again by 50 basis points and brought to the level of 4.50%. The European Central Bank (ECB) also plans to adjust the value by 50 basis points to the level of 2.50%, which is caused by inflation exceeding the targets by five times. The transition of the world economy to the stage of recession next year will lead to a decrease in energy consumption and a drop in oil demand. Market participants are already laying this negative scenario in the prices of WTI Crude Oil, which leads to a decrease in quotations to the level of 72.00 and suggests a further fall to the area of 66.00.

Meanwhile, traders expect that it will take a long time for the decisions initiated by the Chinese authorities to ease quarantine restrictions (including allowing home self-isolation to infected people with mild symptoms and refusing testing for those traveling within the country), as well as adjusting the "zero tolerance" policy for COVID-19 to have an impact on demand for energy carriers.

The long-term trend remains descending. This week, sellers were able to overcome the support level of 76.50 and consolidate below it. Now the target for sales is the mark of 66.00, and new short positions can be considered at the retest of the level of 76.50.

The mid-term downtrend continued this week, as a result of which the price fell to the target zone 3 (71.50-70.75). If this zone is broken down, then the next sales target will be target zone 4 (64.00–63.25). The trend boundary is shifting to the levels of 78.95–78.25 and, if it is tested by the price, it will be possible to consider new sales of the instrument with a target at the minimum of the current week at 71.50.

Resistance levels: 76.50, 82.60, 89.77. | Support levels: 66.00, 62.00.

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