West Texas Intermediate (WTI) crude oil prices experienced a significant decline during the Asian trading session on Monday, falling over 4% to trade around $68.40 per barrel. This sharp drop can be attributed to several factors. The OPEC+ group, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, is on track to gradually ease its production cuts in December. This planned increase in oil production could further dampen oil prices. China, the world's largest crude oil importer, has seen a decline in crude oil imports during the first nine months of the year. This decrease in Chinese demand has negatively impacted global oil demand and consequently, oil prices.
From a technical standpoint, oil prices have retraced some of their recent gains. The MACD indicator has moved below its signal line, suggesting a potential shift in momentum. The Stochastic oscillator has also entered the overbought zone, indicating that a correction may be due. A break below the key $71.00 level could lead to further downside, potentially towards the 20-day and 50-day Simple Moving Averages (SMAs) at $71.80. If the bearish trend continues, the price could decline towards the $67.00 level or even lower to the 17-month low at $65.70. However, a sustained move above the $71.00 level could signal a renewed bullish trend. In this scenario, the price could target the $72.95 level or even the $76.65 level. Overall, while geopolitical tensions and OPEC+ production cuts have provided some support to oil prices, the weakening global demand, particularly from China, and the potential for a stronger US Dollar could limit upside potential. Traders should closely monitor these factors and technical indicators to make informed trading decisions.
