WTI Crude Oil Forecast: Pulls Back Again

• The West Texas Intermediate Crude Oil market has shown itself to be a bit negative, as we have pulled back from the $90 level.
• The market continues to see a lot of noisy behavior, as we see our going back and forth between the possibility of either a lack of demand or a lack of supply.
• After all, a lot of people are wondering whether the global economy is going to slow down, and if it does it makes a lot of sense that demand for crude oil will drop off if we do in fact have a major change in the economy to the downside.

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The market remains somewhat hopeful, so it’ll be interesting to see whether we can break down through the support level at the $82.50 level. The market has a lot of support in that area, extending down to possibly the $80 level. On the upside, there is a lot of resistance near the $90 level, and then again at the $93.50 level. In the meantime, I think we are simply going back and forth to show signs of consolidation and hesitation more than anything else.

Volatility Ahead

The US dollar of course has a certain amount of influence on this market as well, so if the dollar ends up dropping in value, that could make oil go higher since it will take more of those dollars to buy a barrel of oil. If we can break above the $95 level, then it’s possible that we could be looking to the $120 level over the longer term. More likely than not, this is the trajectory if we have any hope of economic strength.

On the other hand, if we turn around and break down below the $80 level, it could be very negative and send oil much slower. I suspect that we have a situation where volatility will continue to be a major influence on this market, so therefore you need to be very cautious with the position sizes you use, as it has been such a difficult market as of late. All things being equal, the market is on the precipice of making a bigger move, but at this point I think you are better off letting the market do first before following.

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