USOil Retreats from Overbought Levels and its 2023 High

  • USOil
    (${instrument.percentChange}%)

USOIL Analysis

USOil runs its fourth straight profitable month, helped by supply curbs from Saudi Arabia and Russia and shrinking inventories, with yesterday's API report showing a draw of more than 5 million barrels. Furthermore, the recent data from China - the world's largest consumer of oil - offered some hope after a series of disappointing releases, since industrial production and retail sales strengthened in August. The International Energy Agency (IEA) reiterated its forecast for global to demand to increase by 2.2 million barrels/day in 2023, led partly by "resurgent Chinese consumption". [1]

However, China's post pandemic recovery is in the doldrums, with subdued factory activity, suppressed consumer demand and low trade activity. At the same time the US Fed has kept the door open to more tightening and today's policy decision could affect oil prices.

On the technical front, USOil reached the most overbought conditions since the 2022 multi-year highs, as shown by the Relative Strength Index (RSI) on the Daily chart and slides today.

This creates risk for further pressure towards the EMA200 (84.50-60) on the H4 chart, but new catalyst would likely be require for a breach. Daily closes below it could halt the bullish bias, but that does not look very easy under current conditions. Above the 38.2% Fibonacci the decline is viewed as a limited correction that can eventually help USOil to new 2023 highs (93.76), but we are cautious at this stage for further gains past the descending trend line from last year's highs (at around 97.40).

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 17 Jun 2024 https://www.iea.org/reports/oil-market-report-september-2023

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