The West Texas Intermediate Crude Oil market had a rough trading session on Friday as most assets did. We sliced through the $110 level, and the 50-day EMA. The size of the candlestick is rather brutal, and it suggests that we will have a further downside. Ultimately, I think this is a market that will find buyers eventually, so Im waiting for signs of stabilization that I can take advantage of. I have no interest in shorting oil anytime soon because it has been so out of control bullish. The market continues to dance between the idea of a lack of supply, but at the same time the global economy slowing down. Because of this, I think we continue to see a lot of noisy behavior and it is probably only a matter of time before we have to break in one direction or the other.
The $100 level underneath will be a significant support level, so you should pay close attention to it. Furthermore, there is an uptrend line that coincides somewhere in that general vicinity, so thats also another reason to think that there is technical support. That being said, there are a lot of concerns out there about global growth, so that could continue to put a bit of a damper on crude oil.
Biden is going to the Middle East to beg for oil from the Saudi Arabian government, so there is the potential that has an effect on the market. However, I dont necessarily think that Saudi Arabia feels the need to acquiesce, so at this point, I think it comes down to the need for demand destruction.
It is worth noting that gasoline demand has dropped in America, and that will catch some peoples attention. Ultimately, this is a market that will favor the upside, but we may have a little bit of a pullback ahead of us in order to find the support. I suspect that the $100 level will be the “line in the sand” when it comes to the overall trend. As long as we can see above there, I think there is still a chance we see the highs again. If we break down below the $100 level, then I will reassess the entire situation.