The crude oil market remains in focus as technical and fundamental indicators paint a complex picture of potential opportunities and risks. After a sharp decline from its October 7 peak of $77.91 per barrel, crude oil has shown signs of recovery, currently trading above key technical benchmarks like the 50-period EMA. This rebound suggests a possible shift toward bullish momentum, supported by critical technical indicators such as the RSI and Momentum Oscillator.
On the fundamental side, geopolitical tensions and expectations of prolonged OPEC+ supply cuts are driving prices higher despite concerns over weak demand and rising inventories.
Overview
The crude oil market remains in focus as technical and fundamental indicators paint a complex picture of potential opportunities and risks. After a sharp decline from its October 7 peak of $77.91 per barrel, crude oil has shown signs of recovery, currently trading above key technical benchmarks like the 50-period EMA. This rebound suggests a possible shift toward bullish momentum, supported by critical technical indicators such as the RSI and Momentum Oscillator.
On the fundamental side, geopolitical tensions and expectations of prolonged OPEC+ supply cuts are driving prices higher despite concerns over weak demand and rising inventories.
Key Economic Events
Wednesday 2:30 am (GMT+2) - Australia: GDP q/q (AUD)
Wednesday 15:15 (GMT+2) - USA: ADP Nonfarm Employment Change (USD)
Wednesday 17:30 (GMT+2) - USA: ISM Services PMI (USD)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) - USD: Nonfarm Employment Change (USD)
Technical Analysis
Crude oil has experienced a notable decline since its October 7 peak of $77.91 per barrel. A subsequent lower high at $75.63 failed to breach the earlier peak, followed by a dip below the critical $71.16 support level, which triggered further declines. However, the market has since rebounded and is currently trading above the 50-period Exponential Moving Average (EMA), signaling a shift toward bullish momentum. A decisive break above the swing high at $71.376 could act as a trigger for a potential rally.
Key technical indicators reinforce this bullish outlook. The price's position above the 50-period EMA reflects sustained upward momentum, the Relative Strength Index (RSI) has climbed above the neutral 50 level, and the Momentum Oscillator remains above the 100 baseline, all of which point to strengthening market sentiment in favor of further gains.
Potential Upside Targets
Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:
71.376: The initial resistance is 71.376, which represents a peak from November 22.
72.505: The second price target is identified at 72.505, corresponding to a peak marked November 7.
73.673: The third target is established at 73.673, aligning with the 161.8% Fibonacci Extension draw from the swing high, 71.376 to the swing low, 67.659.
77.913: An additional price target is estimated at 77.913, which corresponds to the high marked on October 7.
Potential Downside Targets
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
67.659: The first level of support is determined at 67.659, representing a swing low from December 2.
66.156: The second support level is identified at 66.156, reflecting the daily low marked on October 1.
63.924: The third support level is seen at 63.924, corresponding to the 261.8% Fibonacci Extension drawn from the swing low, 71.158 to the swing high, 75.629.
56.690: An additional downward target is observed at 56.690, corresponding to the 423.6% Fibonacci Extension drawn from the swing low, 71.158 to the swing high, 75.629.
Fundamentals
Oil prices edged higher on Wednesday as geopolitical tensions and expectations of extended OPEC+ supply cuts offset concerns over weak demand, according to a Reuters report. Brent crude rose 0.3% to $73.85 per barrel, while WTI gained 0.3% to $70.13. Market focus remains on Middle East conflicts, including Israel's warning of resumed war with Hezbollah and escalating violence in Syria. Meanwhile, US crude and gasoline inventories unexpectedly increased last week, signaling weaker-than-expected holiday demand. Analysts anticipate OPEC+ will extend output cuts through Q1 2025 despite forecasts of slower global demand growth and rising non-OPEC supply next year.
Conclusion
The crude oil market presents a blend of technical resilience and fundamental uncertainty. While bullish technical indicators, such as the 50-period EMA and rising RSI, suggest potential upside momentum, geopolitical tensions and supply-side strategies by OPEC+ continue to shape market sentiment. Key resistance and support levels provide a framework for traders to anticipate potential price movements amid these dynamics.
Ultimately, the interplay of supply cuts, geopolitical risks, and demand signals will determine the market’s direction in the near term. Traders should remain vigilant, considering both technical indicators and macroeconomic events to navigate this volatile environment effectively.