- The West Texas Intermediate (WTI) Crude Oil market has shown some signs of a potential bullish stance on Friday, bouncing from the 50-Day EMA and closing the gap.
- However, the market remains volatile, and the decision by OPEC to cut 1.6 million barrels per day continues to affect prices.
- While the rally may have been a function of short covering ahead of the weekend, the 200-Day EMA sitting below the $82 level will likely provide technical resistance, as the market has seen a certain amount of selling.
Meanwhile, the Brent markets also bounced during the trading session but remained below the 50-Day EMA. The market has filled the gap, but there is pressure on it. Looking at the chart, the market may continue to go back and forth in the general vicinity, as it tries to sort out what happens next. Although OPEC's decision to cut production has helped boost prices, it is also essential to consider whether the cartel sees something ugly ahead, such as a major recession.
The Market Remains Highly Volatile
If the market were to price in some type of recession, it would lead to a significant drop in oil prices, as demand would decrease. However, the market will have to make major decisions soon, and Monday may be a choppy and volatile sideways day. The psychological $80 level underneath is essential to watch, as giving it up to the downside would cause the market to drop significantly. On the other hand, a short-term pop could have the market looking towards the $85 level. That being said, I think we would still see a lot of selling pressure, and I think it would take quite a bit of effort to break above there. That would obviously settle the “supply versus demand” question, but at this point I think we have a lot of work to do in order to show any type of clarity for either the Bears or the Bulls.
At the end of the day, the oil market remains highly volatile, and traders should be cautious about making significant decisions based on short-term rallies or declines. The ongoing pandemic and global economic uncertainty have made it challenging to predict how the market will behave in the future. Therefore, investors need to keep a close eye on fundamental factors, such as production levels, demand, and geopolitical tensions, that may affect oil prices.
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