WTI oil continues its sharp decline amid rising demand worries

WTI oil prices remain in a steep decline for the fifth consecutive day, falling over 1% and hitting a new four-month low in early Tuesday trading. This follows a 3.8% drop on Monday, the largest daily fall since November 16.

The market sentiment has deteriorated due to growing concerns about weakening US demand, indicated by weaker-than-expected data from the US manufacturing sector. Additionally, there are signals that OPEC+ may review and gradually ease its voluntary production cuts from October, following their decision to keep them unchanged during the cartel’s meeting last Sunday.

The technical outlook on the daily chart is firmly bearish. The latest downtrend leg from $87.61 (the 2024 peak on April 12) has retraced nearly 76.4% of the $67.70 to $87.61 rally (December 2023 to April 2024).

However, given the sharp bearish acceleration (with oil prices down over 9% in the past five days), some reaction should be anticipated as oversold conditions might prompt partial profit-taking.

Bears face strong support levels at $72.40 (76.4% Fibonacci retracement) and $71.40 (February 5 higher low), where increased headwinds are expected.

Corrections are likely to be limited under current circumstances (strong downtrend and negative fundamentals) and may present better levels to re-enter the downtrend.

The broken 61.8% Fibonacci retracement level at $75.31 and the former range floor at $76.13 offer strong resistance, ideally capping any upside moves. The falling 10/20-day moving averages ($77.19/$78.02, respectively) are key levels; a break above these would weaken the bearish outlook and expose upper resistance levels at $78.75 and $80.60 (200-day moving average and May 29 lower top).

Res: 74.10; 75.31; 76.13; 77.19
Sup: 72.40; 71.40; 70.61; 70.00