Further decline in oil prices attributed to growing apprehensions regarding demand and diminishing worries over escalation in the Middle East conflict

Thursday saw another drop in WTI oil prices, extending the previous day’s 3% decline, marking the second largest daily loss of 2024 and reaching a new three-week low.

The unexpected increase in US crude inventories, as reported by the EIA, heightened concerns about oil demand. Simultaneously, apprehensions regarding escalation in the Middle East conflict diminished, exerting significant downward pressure on prices.

A reversal signal is emerging on the daily chart, with the price breaking below the daily Tenkan-sen and Kijun-sen lines, exerting pressure on the pivotal Fibonacci support at $81.42 (38.2% of the $71.40/$87.61 upleg). A breach of this level could lead to further declines towards key supports around the $80 zone, which includes psychological support and the convergence of the 55/200 DMA’s.

Despite weakening daily indicators (10/20 DMA’s transitioning to a bearish setup and the 14-day momentum entering negative territory), the oversold conditions could present challenges for bears targeting the $81.42 level.

Any upward movements are likely to be limited by the resistance zone around $84.00 (broken Fibonacci 23.6% level and the 20 DMA), maintaining the momentum for a potential deeper correction.

Fundamentals, particularly concerning demand and the Middle East situation, will continue to steer oil prices in the near term.

Res: 82.77; 83.10; 83.78; 84.15

Sup: 81.42; 80.80; 80.80; 79.50