Fears of Recession Push Oil Prices Lower
16 March 2023
Oil is a frequent topic on our radar, and recently we have been bearish on it. Oil has continued to decline sharply in March, mainly due to the turmoil caused by SVB and Credit Suisse. Traders are afraid of a new crisis and recession, which typically decreases the demand for oil.
March started on a positive note, with a buy signal indicating that the price would rise. The price escaped from the triangle (blue) to the upside and seemed poised to test the resistance at $82.4 USD/bbl (pink). Unfortunately, the breakout turned out to be a false one, and the price reversed sharply. False breakouts are usually great signals to trade in the opposite direction, and oil gave us yet another proof of this. The mayhem caused by SVB and Credit Suisse only reinforced the technical signal that was already there.
Yesterday, WTI broke through the psychological support level at $70 USD/bbl and dropped to its lowest level since the end of 2021. This may not be the end, however. The price is currently dropping towards the $62 USD/bbl level (yellow), which looks like a very promising target for sellers. In my opinion, the chances of the price testing this support level are quite high. It may not happen immediately, as the risk of a bullish correction is rising, but eventually, in the next few weeks, the price should test this support.