The West Texas Intermediate Crude Oil market has fallen rather significantly during the course of the trading session on Tuesday as we continue to see a lot of people start to price and the idea of recession into the energy markets. After all, it was just about a week ago that OPEC decided to cut production by 2 million barrels per day. That generally would send markets higher, but it looks as if something truly negative is starting to be priced into the market.
The thinking of course is that if the global economy is going to slow down, then demand for crude oil will plummet as well. That is typically the case, so it’ll be interesting to see how this plays out over the longer term. The size of the candlestick does suggest that there is a lot of fear out there, and now it’s very possible that we could break through the $83 level and go lower, perhaps down to the $80 level. The $80 level course is a large, round, psychologically significant figure, and therefore a lot of interest will be paid to these big numbers.
Rallies will have to prove themselves
The 50-Day EMA is sitting near the $88 level, and therefore think that could be the “short-term ceiling” in this market. Any move above there would be a bonus, and it could be a major turn of events that opens up a move to the 200-Day EMA. That being said, it will take a significant amount of momentum to make that happen, especially as the 2 million barrel per day cut did not achieve that goal.
The only thing I think you can count at this point in time is that the volatility is going to pick up, not shrink.
- Oil is going to continue to move back and forth on the perceived global economy, and where we are going forward.
- Right now, nothing looks very good, so I think at this point we’ve got a situation where oil continues to have limited rallies.
- A “buy-and-hold” type of situation is very unlikely to see any traction anytime soon. We would need to see a significant amount of risk appetite enter the market at that point.
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