Crude oil prices are digesting losses after dropping to the lowest level in nearly four months. On March 14 oil climbed slightly by nearly 0.2 percent, even slumping to as low as 46.963, with closing price at $48.373 a barrel after Saudi Arabia disclosed an increase in production. However, it has seen a significant loss in value of crude over the past week, tumbling by nearly 8.5 percent beyond expectation.
Saudi Arabia told OPEC that it raised output back above 10 million barrels a day in February, by 263,300 barrels a day to 10.011 million a day, reversing around a third of the cuts it made the previous month. Oil prices sank on speculation the country had grown impatient with fellow producers lagging in their own cutbacks. Saudi Arabia’s Energy Ministry said that the volume of crude supplied to markets nonetheless fell by 90,000 barrels a day to 9.9 million, as the extra supplies were moved into storage.
This announcement from the kingdom was sending crude to the lowest level since late November. That also pushed stocks and commodity-linked currencies, such as the Russian Ruble and the Norwegian krone, lower, while fuelling demand for the relative safety of Treasuries.
Oil broke below $50 a barrel last week for the first time since December as rising supply from U.S. partially offset agreed production cuts by oil-exporting nations. West Texas Intermediate for April even dropped as low as $46.963 on Tuesday.
Data from Saudi Arabia shows that it’s cutting output more than required under the terms of OPEC’s Nov. 30 agreement. It remains determined to stabilize the global oil market, according to the statement from the ministry.
The prospect of oil prices could get worse. Strategists at Commerzbank AG suggest the rebound in U.S. production may send oil prices tumbling to $40 this summer.
Technically, after a blistering decline in crude oil prices, it remains in a downside momentum that may induce a further drop. As its 30-minute chart showed, it saw a great resistance below the March 14 highs at 48.649, impeding its momentum of the increase. It’s currently trading at a stable range, waiting for later market news. If it fails to breakout the resistance range, it may turn back to decrease further and traders tend to look for short sell.
Chart 1: WTICOUSD 30-Minute
Based on the indicator of MACD (12) on the daily chart, its continuous decrease led to the further slump of MACD, with no signal of rebound at the moment. If its momentum of MACD turns back in an upward trend, traders may look for a long position.
By drawing Fibonacci retracement for current downside, a turnaround move to breakout the level of 48.728 has a possibility of 23.6 percent. Therefore, over the next couple of days it may see rebound, but the long-term downside trend may not change.
Chart 2: WTICOUSD Daily
