Is crude oil still forming a bottom?
Crude oil closed 3.66% lower on Thursday, pulling back from around $63 after Wednesday's brief relief rally. Today's trading shows the market down an additional 0.4%, appearing to stabilize somewhat after yesterday's decline. This price action reinforces the view that we're seeing a volatile consolidation following the breakdown below important medium-term support levels of $65-66.
For oil markets specifically, these developments are bearish:
- The market is experiencing exceptional volatility due to the ongoing trade tensions between the U.S. and China.
- PPI data came in lower than expected at -0.4% month over month, suggesting potential deflation in producer prices which could signal weakening demand.
- Growing fears of a global recession that could significantly reduce oil demand.
Conclusion
Crude oil extends its volatile consolidation following recent breakdown below important medium-term support levels of $65-66. Thursday's 3.66% decline and today's modest 0.4% drop suggest the market is attempting to stabilize, but remains vulnerable to further trade war developments.
The escalation of tariffs between the U.S. and China creates significant uncertainty for global economic growth and, by extension, oil demand.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil pulled back 3.66% on Thursday from around $63, and is down an additional 0.4% today.
- The medium-term outlook appears bearish following technical damage, and unclear amid conflicting signals from tariff developments.
- In my opinion, the short-term outlook is neutral, and no speculative positions are justified from the risk/reward point of view.
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Thank you.
Paul Rejczak,
Stock Trading Strategist