Oil prices haven’t been able to extend gains after the initial jump following the surprise announcement of the output cut by OPEC+ producers. There could be a couple of reasons for the wait-and-watch mode.
The modest rebound in China’s economic growth suggests the recovery could be delayed there, just as other economies risk a recession. If energy prices rise further, it would complicate central banks’ efforts to curb inflation, posing further headwinds for the global economy. Put together, the prospect of lower oil demand can’t be ruled out. Another key factor to watch would be to what extent the group exercises compliance with the agreement. Full implementation could take time to play out.
Crude Oil Daily Chart
This comes as crude oil tests crucial converged resistance at 82.50-84.50, including the 200-day moving average and the January high. Oil would need to break above the crucial barrier for the nine-month-long downward pressure to fade. A decisive break above 82.50-84.50 could open the way toward the November high of 93.75.
So far, the rally appears to be corrective within a bearish phase, as the colour-coded candlestick chart based on trend/momentum indicators suggests. Moreover, the 14-week Relative Strength Index has been capped around 50-55 — corrective rallies often tend to run out of steam around 50-55.
Crude Oil Weekly Chart
On the downside, the upper edge of last weekend’s gap (at about 79.00) is initial support, while the lower edge of the gap (around 75.50) is secondary support. If the bullish gap is closed, it would raise the odds that the rebound since late March was a dead-cat bounce.
Crude Oil 240-minute Chart
Oil rebounded in March from quite a strong cushion on the 200-week moving average, near the August 2021 low of 61.75.