Oil prices have slumped this week after failing to hold onto support in the $90 region. Crude has slipped further from $100 and it is clear that traders are bailing out.
OIL – 4H Graph
The most recent drop in oil is purely technical, and traders can trade this volatility from both the long and short end.Prices may look at a short-term bottom at $82 with a target of $85.
The critical fundamental problems for crude oil are the decline in economic growth projections amongst the most powerful trading nations and the continued lockdowns in China, with around 65 million people locked down across 33 cities.
The US government is now trying to build a coalition on a proposed oil price cap on Russian crude to squeeze Moscow further. Market participants see that as a symbolic move, as Russia has shown that it can work around G-7 sanctions.
Oil prices this week were affected by a decision by the Organisation of Petroleum Exporting Countries and its allies on Monday to cut production. Saudi Arabia reduced prices for customers in Asia and Europe for next month’s shipments.
Oil market participants are lamenting the low volume in oil markets. With interest rates rising and liquidity drying up in alternative investments, crude is struggling to get traction.
The light volume brings increased volatility, reducing the desire for some investors to get involved. However, for nimble traders, the recent selling will be a chance to grab the oil price swings.
Oil was also hurt by news of a surprise build in US crude stockpiles. Crude inventories rose by 3.6 million barrels per week compared to 593,000 barrels reported the previous week. Analysts expected a decline of around 733,000 barrels, adding to fears that the market is struggling with slowing demand.
