Crude Oil Could Be Closer to a Bottom: Here's How to Trade it
Crude oil started the new week on the front foot, continuing their recovery from the end of last week. But after seven consecutive weekly losses, the momentum was bearish and there was a good chance the early momentum would fade.
Still, the worst of the sell-off may be behind us after what has been a brutal couple of months. The ongoing supply cuts from OPEC and allies should keep the downside limited from here on. If anything, the risks are skewed to the upside from here, I believe.
Despite the bounce at the end of last week, oil prices still closed the week lower, extending the run of losses to 7 weeks. The descent follows the voluntary output cuts that were made by OPEC+ a couple of weeks ago, which left the markets unimpressed. The sell-off gained momentum as successive support levels succumbed, giving rise to more technical selling.
As well as doubts regarding the effectiveness of OPEC's recent output cuts, investors have also been concerned by the continuous growth in US crude exports, pointing to excessive non-OPEC supplies. The substantial daily export of nearly 6 million barrels of oil by the US puts pressure on OPEC+ members to relinquish more market share as part of their supply reduction agreement. Some members are rightly reluctant to further cut production, fearing the loss of market share to the US.
What’s more, fears about demand have also played a big part in the recent drop. The global economy remains stagnant due to elevated interest rates, while the lingering impact of past inflation spikes continues to negatively affect both consumers and businesses. The slow disinflationary process further exacerbates these challenges.
Despite these economic headwinds, though, the severity of the oil price decline
Read more on investing.com
