WTI SIGNAL 16-03-22 : Crude Oil Price Outlook – Paring Recent Losses But The Move Looks Unconvincing.


WTI SIGNAL 16-03-22 : Crude Oil Price Outlook – Paring Recent Losses But The Move Looks Unconvincing.

Brent crude is stemming recent losses and turning higher for now after giving back over 50% of its recent surge. Today’s move may prove to be more of a bear market bounce than a pronounced move higher with the macro backdrop providing potential headwinds for oil. The coronavirus surge in China continues with tens of millions of people across the country now placed under quarantine restrictions. The tech-hub Shenzhen (12.6 million residents) and the Jilin province (24 million residents) have both been put under total lockdown for between five and seven days,, sparking fears of further global supply chain issues. A slowdown in economic activity will dampen demand for oil in China and have knock-on effects in countries further down the supply chain.

WTI SIGNAL : The latest round of talks between Russia and Ukraine seems to be producing some mildly positive headlines with Russian Foreign Minister Lavrov saying that ‘Neutral status for Ukraine is being seriously considered’ and while ‘peace talks with Ukraine are not easy, there are certain hopes for compromise’. Risk markets have pushed higher on this commentary but remain guarded as always with any commentary on the crisis in Ukraine taken with a degree of skepticism.

The daily price chart shows how Brent has given back around 50% of the December 2 – March 6 rally, with the reversal taking less than 10 days. The 61.8% Fib retracement of the move sits at $92.6/bbl. and this should act as fairly strong support, while the 38.2% retracement is situated at $109.6/bbl. and this should provide resistance to any move higher. Brent remains oversold according to the CCI indicator, while volatility remains at levels last seen over a decade ago.

WTI SIGNAL : If we look at US Crude Oil, IG retail trade data 63.57% of traders are net-long with the ratio of traders long to short at 1.75 to 1. The number of traders net-long is 12.83% higher than yesterday and 16.29% higher from last week, while the number of traders net-short is 25.37% lower than yesterday and 29.66% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias.

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