Oil plummets below $28 US crude oil fell to its lowest level since September 2003, on concerns over a global supply flood. The International Energy Agency (IEA) said the global oil supply was set to last and that oil markets could “drown in oversupply”.
On top of that, the recent end of sanctions on Iran, simply added to worries of an already oversupplied market. What’s more, the Chinese President trip on Tuesday to Saudi Arabia and later this week to Iran may put further downward pressure on oil prices, if these countries compete over oil sales share to their largest crude oil importer.
Bearing this in mind, we could see oil prices heading even lower from their current level, and energy related currencies like CAD and NOK, to remain under selling interest.
WTI tumbled on Tuesday after it tested the psychological zone of 30.00 (R2) as a resistance. Subsequently, the price fell below the support (now turned into resistance) line of 28.40 (S1). The short-term trend remains negative in my view and therefore, I would expect the bears to maintain their momentum and aim for the 26. 85 (S1) support area. Looking at our short-term momentum studies, I see that the RSI slid after it hit resistance slightly below its 50 line and now looks ready to fall below 30, while the MACD, already negative, has topped and fallen below its trigger line. These indicators reveal strong downside speed and magnify the case for further declines.
On the daily chart, I see that WTI has been printing lower peaks and lower troughs since the 9th of October. As a result, I would consider the longer-term picture to stay negative as well.
• Support: 26.85 (S1), 25.00 (S2), 24.00 (S3)
• Resistance: 28.40 (R1), 30.00 (R2), 32.00 (R3)