Jump to content

Oil Price Susceptible to RSI Sell Signal amid Rise in US Inventories


MongiIG

Recommended Posts

OIL PRICE TALKING POINTS

The price of oil falls back from a fresh yearly high ($87.10) amid an unexpected rise in US inventories, and looming developments in Relative Strength Index (RSI) may indicate a larger pullback for crude if the oscillator falls below 70 to offer a textbook sell signal.

 

OIL PRICE SUSCEPTIBLE TO RSI SELL SIGNAL AMID RISE IN US INVENTORIES

Crude fills the price gap from earlier this week as US inventories increase for the first time November, with stockpiles rising 0.515M in the week ending January 14 versus forecasts for a 0.938M decline.

Image of DailyFX Economic Calendar for US

It remains to be seen if the Organization of Petroleum Exporting Countries (OPEC) will respond to the development as the group appears to be on a preset course in restoring production to pre-pandemic levels, and the recent weakness in the price of oil may turn out to be a correction in the broader trend as the group stays on track to “adjust upward the monthly overall production by 0.4 mb/d.

Looking ahead, OPEC and its allies may stick to the same schedule at the next Ministerial Meeting on February 2 as the most recent Monthly Oil Market Report (MOMR) still projects strong demand for crude oil, with the report revealing that “in 2022, world oil demand growth has been kept unchanged at 4.2 mb/d with total global consumption at 100.8 mb/d.”

Image of OPEC Monthly Oil Market Report

As a result, it seems as though OPEC and its allies will be undeterred by the Omicron variant as “projections for economic growth remain robust,” and the group may retain the current schedule over the coming months as “demand for OPEC crude in 2022 also remains unchanged from the previous month to stand at 28.9 mb/d, around 1.0 mb/d higher than in 2021.

Image of EIA Weekly US Field Production of Crude Oil

In turn, the price of oil may exhibit a bullish trend in 2022 as a deeper look at the figures from the Energy Information Administration (EIA) show weekly field production holding steady at 11,700K for the second week, and the tepid recovery in US output may act as a backstop for the price of oil as indications of limited supply along with expectations for stronger demand.

With that said, the recent weakness in the price of oil may turn out to be a correction in the broader trend, but the Relative Strength Index (RSI) warns of a larger pullback for crude as the oscillator falls below 70 to offer a textbook sell signal.

OIL PRICE DAILY CHART

Image of Crude Oil price daily chart

Source: Trading View

  • Keep in mind, the price of oil cleared the July high ($76.98) after defending the May low ($61.56), with crude trading to a fresh 2021 high ($85.41) in October, which pushed the Relative Strength Index (RSI) above 70 for the first time since July.
  • A similar development appears to be materializing in January as the price of oil clears the 2021 high ($85.41), but a textbook RSI sell signal may take shape if the oscillator falls back from overbought territory to push below 70.
  • In turn, lack of momentum to test the $88.10 (23.% expansion) region may generate a near-term pullback in the price of oil as it snaps the series of higher highs and lows form earlier this week, with a break/close below $84.20 (78.6% expansion) bringing the $81.50 (100% expansion) region on the radar.
  • Next area of interest coming in around $78.50 (61.8% expansion) to $78.80 (50% expansion) followed by the Fibonacci overlap around $76.90 (50% retracement) to $77.30 (78.6% expansion).
 

Written by David Song, Currency Strategist. 21st Jan 2022, DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Ever feel like you're stuck in crypto traffic? Slow transactions and outrageous fees are the bane of using blockchains like Ethereum at their core (Layer 1). These networks can only handle a limited number of transactions per second, causing major congestion during peak hours. The result? Frustratingly slow processing and expensive fees for users.   But wait, there's hope! Layer 3 rollups are here to revolutionize the game. Imagine them as express lanes built on top of existing bypass roads (Layer 2 solutions). Layer 2 already helps by alleviating some of the traffic on the main highway (Layer 1). Layer 3 rollups take it a step further, adding dedicated express lanes to these bypass roads for super-fast processing. This innovative approach tackles Layer 1's congestion by distributing the workload across multiple layers, ultimately leading to faster, cheaper, and more scalable blockchain applications.   While specific layer 3 implementations are still under development, some projects are paving the way. Immutable X (IMX token) built on StarkNet (a Layer 2 scaling solution) and dYdX (DYDX token), a decentralized exchange on StarkNet, are both exploring layer 3 rollups to achieve even smoother transactions. Keep an eye out for zkLink Nova, a major player in the scalability game. This cutting-edge technology leverages the strengths of existing solutions to deliver groundbreaking performance. Backed by leading crypto institutions with over $23 million invested in the zkLink ecosystem, zkLink Nova is generating serious buzz ahead of its ZKL token listing on Bitget. Get ready for a smoother ride on the crypto highway!
    • Well, I didn't mine $PIXFI but I was able to make good profit from Bitget Poolx. 
    • This partnership further shows Bitget continuous passion for massive crypto adoption 
×
×
  • Create New...
us