WTI Crude Oil:
The West Texas Intermediate (WTI) Crude Oil market experienced further declines during Tuesday's trading session, erasing the entire gap that formed after OPEC's announcement of a significant 1 million barrel production cut. Currently, the market has broken below the bottom of that gap and appears to be targeting the $67.50 level. This level has previously acted as strong support, and if it fails to hold, there is potential for a further decline towards the $65 level.
However, if the market manages to break above the high of Tuesday's candlestick, it could signal a move towards the $75 level. This level holds psychological significance as a major round number and could pave the way for an advance towards the 200-Day Exponential Moving Average (EMA). Nevertheless, such a scenario is not expected in the near term.
Brent:
The Brent Crude Oil market has also experienced a significant decline, falling well below the gap that formed after the weekend announcement. The inability of production cuts to lift the market indicates the deep concerns of global markets regarding the possibility of a major recession or potentially worse economic conditions. As crude oil is considered the "lifeblood" of the global economy, a slowdown in economic activity leads to a decrease in demand. Such a fundamental headwind typically exerts downward pressure on crude oil prices, and this trend is expected to continue.
Even if the market enters a sideways consolidation phase, it would reflect the prevailing negativity. Under normal circumstances, reduced oil supply in the system should drive prices higher. However, the lackluster results in the face of production cuts indicate the severity of the situation. Should the market manage to break above the $80 level, it could potentially target the 200-Day EMA. However, it is important to note that the $70 level is anticipated to provide substantial support, potentially acting as a strong floor for the market.
At the end of the day, both the WTI Crude Oil and Brent markets witnessed significant declines, with Brent falling well below the gap formed after the production cut announcement. The concerns surrounding the global economy's potential slowdown or worse have had a significant impact on crude oil prices. A break below key support levels could lead to further declines, while a break above important resistance levels may signal potential recoveries.
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