As the fallout from the Russian-Ukrainian war cools, Oil has seen a sharp decline over the past week, with WTI falling from highs near $130 to lows of $98 right now.
The market feared an escalation in sanctions but that does not seem to be the case today as Europe refuses to shoot itself in the foot and other major importers such as India and China refuse any boycott.
So what’s next for oil prices from now on?
Geopolitical strife sped things up and the technical break above $95 saw the price soar all the way up to $100. We hit the target of $120-$125 before the big retreat happens now.
From a fundamental standpoint, I’m still bullish on oil prices, but China’s lockdown throws a slight bend in the picture. Add in the risks of stagflation, i.e. economies slowing down, this could impact the bullish outlook in the coming months.
The bullish outlook is largely based on a confluence of factors, namely that inventories are low as producers struggle to keep up with the recovery in demand
, and a curve that was down sharply before. Add to that the continued reliance on oil in the green transition and it has the ingredients for strong fundamental support.
Of course, the latter is something that will take years to play out, but you have to be aware of that.
Based on the chart, the $50.0 retracement level at $95.94 will be a key target, but round numbers might do more talking at this point. The $90 mark will be one to watch before seeing the 100-day moving average (red line) again, now close to $84. ADVERTISEMENT – KEEP READING BELOW