The China headlines recently have been a main catalyst for the drop in oil prices, as protests and lockdowns point towards unrest and further demand destruction. The rumours of OPEC+ wanting to increase output in the past week also isn’t helping, even if Saudi officials have denied that. Here’s a look at the technical picture for oil:
That is quite a poor look with the double top pattern in the past month or so now being vindicated as we see prices fall to their lowest since January this year. Adding to that, we are seeing the trendline support (white line) give way but more importantly, the 100-week moving average (purple line) has also been breached.
Further support can be seen around $70 next, which may act as the next psychological level. But beyond that, we may be looking towards the December 2021 low at $62.43 next for oil.
As much as the latest OPEC+ output cut and global reopening should spur prices, we haven’t really seen that sort of spike after things have somewhat calmed down in the Russia-Ukraine conflict.
Obviously, China is a key driver of demand conditions as well but considering how they are adamant in sticking with their zero-Covid policy for now, that’s a major blow for hope and risk optimism to start the new week.