On Tuesday, the Crude Oil market experienced fluctuations, pulling West Texas Intermediate (WTI) US Crude Oil prices below the $78.00 per barrel mark. The descent was fueled by the absence of the anticipated increase in Chinese Crude Oil demand.
Despite the Organization of the Petroleum Exporting Countries (OPEC) extending production caps into the first quarter, aimed at supporting global Crude Oil prices, the ongoing rise in production from non-OPEC nations, particularly the United States, persists. Speculations about potential refining cutbacks have yet to materialize, as OPEC’s efforts to limit the output of its member states face headwinds.
An unexpectedly warm winter in the northern hemisphere led to lower-than-expected heating oil demand, diminishing stock drawdowns as the cold months wane. Energy markets, growing weary of waiting for a surge in Chinese Crude Oil demand, remain unconvinced. China, targeting a 5% growth in 2024, faces challenges in achieving substantial expansion in Crude Oil demand, given the comparatively modest growth figure.
Concerns about a possible ceasefire in the Gaza conflict are also impacting Crude Oil prices. The market is adjusting to the limited impact of Houthi rebels attacking civilian cargo ships in the Red Sea, with most shipping lanes avoiding the Suez Canal.
WTI Technical Analysis
In terms of technical outlook, WTI extended its decline from last week’s peak at $80.33, breaking through the near-term congestion at the 200-hour Simple Moving Average (SMA) of $77.98. The current technical support for US Crude Oil lies around the $77.50 level, with bids testing the lower side of $78.00 per barrel.
Tuesday’s decline in WTI prices places US Crude Oil at a testing point around the 200-day SMA at $77.80, ushering WTI back into a period of technical consolidation. Despite a recovery from the last swing low at $71.50, Crude Oil faces challenges in sustaining bullish momentum. The market remains watchful for developments in Chinese demand and OPEC measures, influencing the trajectory of global Crude Oil prices.