Crude oil prices steadied on Thursday following a significant drop to $65.40 on Wednesday, marking a fresh retracement low. The market is set to close the day with an inside-day pattern after experiencing a sharp 19% decline from the January high of $80.76. This downturn represents the steepest correction among the past four bearish phases, which ranged from 14.8% to 18.3% declines.
Signs of a Potential Bottom Forming
Given past correction trends, crude oil appears to be nearing a possible bottom, which may trigger at least a temporary bounce. Support for the decline emerged near the September low of $65.65. Additionally, the price found support at the lower trendline of a descending channel, reinforcing the potential for stabilization.
Lowest Weekly Close in Nearly Two Years Possible
A key concern is the upcoming weekly closing price. A close below $67.22 would mark the lowest weekly close since March 2023, while a drop below $66.37 would be the lowest since August 2021. Such a development would reinforce the broader bearish trend and confirm ongoing downside risks.
Long-Term Downtrend at Risk of Extending
Recent price action, coupled with a test of long-term support, suggests that crude oil could eventually break lower to fresh lows. However, if support at prior long-term lows and the lower channel boundary holds, a short-term rebound may occur first. This could potentially lead to a larger bullish reversal, but until then, the downtrend remains intact, keeping the risk of further declines on the table.
Key Resistance Levels for a Possible Rebound
Since Thursday formed an inside-day pattern, an initial bullish signal would emerge if crude oil rises above $67.25. The first upside target stands at $68.10, where previous support levels converge, including an uptrend line, a December interim swing low, and last week’s minor trend low. Further resistance is seen around the 20-day moving average, currently declining at $70.60.
While the market remains in a bearish phase, the recent stabilization suggests that traders should watch for potential signs of a short-term bounce before the broader trend determines the next major move.
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