By WTI Crude Oil Forecast: Oil Plunges on Economic Fears
Oil will eventually be attractive again, but it certainly is not going to be right now.
Having said that, oil is probably due for some type of bounce, so definitely be cautious and take advantage of signs of exhaustion after short-term rallies. I anticipate that the $80 level will probably have a certain amount of psychology attached to it, but at the end of the day it is a level that a lot of people will simply look to as previous support that should now offer resistance going forward. This is essentially “market memory” coming back into play, and I think that’s what my first choice would be for a potential setup.
On the other hand, if the oil market breaks down below the lows of the Monday session, it’s very likely that we see the $75 level targeted over the next several days. Oil has been getting shellacked for a couple of weeks now, because quite frankly there is going to be very little demand for crude in a world that is slowing down so drastically. The Federal Reserve tighten monetary policy is going to drive down demand in and of itself, and then of course strengthening US dollar means that I will take less of that currency to buy a barrel of oil.
We had the “death cross” about 2 weeks ago, and the market has not looked back since. Having said that, we had also been in a descending channel for quite a while, so that in and of itself should not be a huge surprise either, at least that it is going to continue. Oil will eventually be attractive again, but it certainly is not going to be right now. The market will continue to be noisy, but that is the very nature of the crude oil market anyway. OPEC will probably chirp the market here and there, but it has no real possibility of influencing prices for more than a blip at this point.
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