The $55 level has been a major floor in the light sweet crude oil market.
Crude Oil
Crude oil markets have been generally negative during December as we continue to pay close attention to a downtrend line. But perhaps more importantly, I think we’re going to continue to pay a lot of attention to the $55 level. The $55 level has been a major floor in the light sweet crude oil market, and I think that continues to be a major battleground.
Whether or not we can break down below, there is still a question that remains to be answered, but I would not be surprised at all to see more of the same action in January that we have seen in both November and December. Quite frankly, the only sign of life in this market over the last couple of months has been due to new sanctions against Russia. And that bullish behavior was squashed almost immediately.
Major Resistance
This has shown that the $62 level is a major resistance barrier that I think is going to take some type of external pressure to break above. I also believe that January will end up being fairly weak from a cyclical standpoint as well, as typically speaking, January is somewhat soft. All things being equal, I think that January will behave in the same way we have seen the oil market behave in general, that anytime we get some type of rally, you’re looking to sell the first signs of exhaustion.
I do not want to get long of oil anytime soon because we do have massive amounts of supply coming out of Guyana and the United States, just to name a couple of places. In other words, the market is awash in oil, and therefore, it’s counterintuitive to think that prices will rise anytime soon. Yes, there will be more sanctions against Russia, would be my bet, but really, at the end of the day, Russian oil still ends up in Europe and Asia, and to a lesser extent, even the United States. So, it’s all a shell game. We have plenty of oil out there. I think we continue to see a lot of overhang as far as selling pressure is concerned.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
