Oil prices look due a technical correction
Bulls have been burned by betting on rally in recent weeks
Here are some oil market technical indicators for investors to consider.
The week started with Brent hitting its lowest in nearly six years, and by mid-session on Monday taking its slide over the past six months to nearly 55 per cent.
The decline has accelerated of late — the price shedding 33 per cent over the past 30 trading days.
That took the Brent crude price’s 14-day relative strength index, a momentum gauge, to 15.7, near historic lows and deeply in supposedly “oversold” territory.
The falls are being matched in the US-traded WTI contract.
Indeed, the WTI price is now 47 per cent below its 200-day moving average, which as Strategas Research calculates is significantly more than two standard deviations. A very unusual overshoot.
As Danske Bank notes the latest futures data shows “speculators added net longs in oil for the second consecutive week, sending non-commercial positioning in the black gold to levels last seen in November”.
Still, technical analysts at Barclays believe WTI may pause for a time.
“While the absence of bottoming patterns in price makes us reluctant to call for a base, we do expect a period of consolidation. This is further backed by stretched momentum studies across all timeframes.”
Watch WTI support at $45.37 a barrel, says Barclays