Oil prices continued to drift lower this week but signs are emerging that the pace of decline is easing. With much of the supply glut now likely reflected in prices, there is potential for WTI crude to stabilize around 55 handle, even if near-term weakness extends.
The downtrend persisted since OPEC and its allies started expanding production earlier in the year, and major institutions warn that oversupply may persist well into next year. Last week’s IEA forecast reinforced bearish sentiment, warning that the global oil market could swing into a 4 million barrel-per-day surplus by in. The agency cited sustained output growth and sluggish demand as key drivers.
At the same time, geopolitical backdrop has also turned calmer. Ceasefire between Israel and Hamas helped reduce the Middle East risk premium, dampening prices further as fears of supply disruption fade.
Technically, however, downside momentum in WTI is fading. Bullish convergence is starting to appear in 4H MACD, while WTI is pressing the lower boundary of its near-term descending channel. The 55.20 key support, marking this year’s low from April, may offer strong support and turn WTI into sideway consolidations. Nevertheless, break of 59.47 resistance is needed to indicate short term bottoming, or risk will remain on the downside.
