Market update: brent crude, WTI edge cautiously higher

The oil market is grappling with indecision, a trend likely to persist as long as oil fundamentals remain stable. Economic projections for 2024 suggest subdued global economic growth, potentially leading to minimal oil demand growth. This scenario raises the prospect of an oversupplied oil market, exerting downward pressure on prices. In terms of growth, attention this week shifts to oil (WTI) as the US GDP data for the fourth quarter is due. The last quarter of 2023 is anticipated to show a marked decline from the impressive 4.9% growth in Q3 to 2%.

On the other side of the equation, current tensions in the Middle East and threats to Western shipments traversing the Red Sea could impact prices. However, as only about 12% of the total global seaborne oil trade navigates through the Red Sea, a significant disruption would be necessary to materially affect oil prices.

Brent crude technical analysis – upside level of interest at $82

Brent crude oil prices have been sluggish, hampered by an unclear fundamental outlook. The MACD indicator suggests a gradual, steady uptrend, particularly following the December 13th swing low. If this moderate ascent continues, $82 emerges as a critical resistance level, having previously acted as a pivot point. Furthermore, the $82 mark coincides approximately with the 200-day simple moving average. Support lies significantly lower, at the $71.50 level, with an intermediate $77 level acting as the 50% Fibonacci retracement of the major 2020–2022 rise.

Brent crude oil daily chart

WTI faces resistance ahead of significant $77.40 marker

WTI oil prices have successfully navigated the $72.50 test, opening up a return to the significant long-term level of $77.40 – which coincides with the 200-day simple moving average. The uplift in prices since the swing low continues with trepidation, lacking conviction. The $72.50 level appears as near-term support.

WTI oil daily chart

IG Client Sentiment 'mixed' while longs massively outweigh shorts

Oil - US Crude: Retail trader data shows that 83.18% of traders are net-long, with the ratio of traders long to short at 4.94 to 1.

We typically take a contrarian view to crowd sentiment, and the fact that traders are net-long suggests Oil - US Crude prices may continue to fall.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed Oil - US Crude trading bias.

IG Client Sentiment (US oil) WTI

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