Oil price weakens on fears debt-ceiling deal could be derailed WTI Brent Oil Technical Analysis Fundamental Analysis
Democrat have voiced their disapproval and may vote against the deal. If the US defaults on its obligations, financial chaos is expected to follow, probably hitting the Oil price, though some analysts have said themight also suffer, which would be positive for Oil since it is mostly priced in USD. Mixed messaging from OPEC+ adds to the opaque outlook.
Both the debt deal as well as robust US macroeconomic data has increased market expectations that the Federal Reserve will have to raise interest rates to combat rising inflation expectations – bullish for the US Dollar; bearish for Oil. Oil traders further await the outcome of the next meeting of OPEC+ on June 4, when the possibility of production cuts has been mooted.
Russia’s Energy Minister Alexander Novak, however, later played down the idea of production cuts. “I don't think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries," he said. WTI Oil is in an established downtrend from a technical perspective, making successive lower lows, and so given the old adage that the trend is your friend, this overall favors short sellers over longs.
A break below the year-to-date lows of $64.31 would imply a new lower low was forming, reigniting the downtrend. The next target from there would be at around $62.00, where trough lows from 2021 will come into play, followed by support at $57.50. The long hammer Japanese candlestick pattern that formed at the May 4 lows is a further sign that Oil price may have formed a strategic bottom.
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