Oil Price Forecast: Lower amid U.S. Recession Fears and Weaker Demand

Highlights

• Oil futures fall due to recession concerns and demand worries
• U.S. Dollar watched closely as a market indicator
• OPEC and Russia output reduction may cause tightening and higher prices

Overview

U.S. West Texas Intermediate crude oil futures are inching lower on Thursday. This is due to cautious traders who are worried about the possibility of a U.S. recession and weaker oil demand. Additionally, traders are paying attention to the U.S. Dollar as an indicator for the market’s next major move.

Prior to today’s price dip, the U.S. benchmark had hit its highest point in a month. The catalyst behind the move was cooling inflation data which gave traders hope that the Federal Reserve would halt their plans to increase interest rates.

At 11:45 GMT, June WTI crude oil futures are trading $82.94, down $0.15 or -0.18%. On Wednesday, the United States Oil Fund ETF (USO) settled at $72.43, up $1.36 or +1.91%.

Biden Administration Plans to Refill Strategic Petroleum Reserve at Lower Prices

On Wednesday, despite a rally in the market, there were some headwinds to overcome. Although U.S. crude oil stocks showed a small increase last week, the market didn’t react negatively, as it was partly attributed to a congressionally-mandated release of oil from the U.S. emergency reserve and lower exports at the beginning of the month. However, gasoline and distillate stocks were drawn down less than anticipated.

Meanwhile, the Biden administration is planning to refill the U.S. Strategic Petroleum Reserve soon, but they hope to do so at lower oil prices, according to U.S. Energy Secretary Jennifer Granholm.

Additionally, two weeks ago, the decision by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to reduce output caused the oil market to surge. As a result, the global oil market may experience a tightening in the latter half of 2023, leading to higher prices, according to Fatih Birol, the executive director of the International Energy Agency.

Daily June WTI Crude Oil Technical Analysis

The main trend is up according to the daily swing chart. A trade through $83.38 will signal a resumption of the uptrend. A trade through $64.58 will change the main trend to down. This is highly unlikely. However, due to the prolonged price and time rally, traders should watch for a closing price reversal top to signal a shift in momentum.

The nearest support is a minor pivot at $81.39. The closest resistance level is the Nov. 7, 2022 main top at $86.40.

Daily June WTI Crude Oil Technical Forecast

Trader reaction to $83.09 is likely to determine the direction of the June WTI crude oil market on Thursday.

Bullish Scenario

A sustained move over $83.09 will indicate the presence of buyers. Taking out the week’s high at $83.38 will indicate the buying is getting stronger. This could also trigger an acceleration to the upside since there is no major resistance until $86.40.

Bearish Scenario

A sustained move under $83.09 will signal the presence of sellers with $81.39 the first target. If this fails then look for the selling to possibly extend into the minor bottom at $79.40.

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