Oil Selloff Finds Support as the Reality of a Tighter Oil Market Takes Hold

• WTI oil finds support around significant long-term level, hinting at a reversal
• Brent crude oil turns just short of bridging the price gap created by OPEC’s surprise supply cut

WTI OIL FINDS SUPPORT BEFORE CLOSING THE PRICE GAP

Oil markets have mounted somewhat of a challenge to the latest selloff around the long-term level of $77.40. The signs of bearish fatigue ahead of the $75.75 level appears just short of technically completing a full retracement of the recent gap higher.

Subsequent candles showing a reluctance to trade lower (via the lower candle wicks) suggests that bears may be running out of momentum or require an additional catalyst to bridge the gap. The latest round of OPEC cuts come into force in May and markets are potentially more evenly balancing risks of a growth slowdown and reduced oil supply, balancing the market for now.

With $77.40 acting as immediate support, the next level of consideration in the event of a bearish continuation is $77.40. On the other hand, resistance appears around the $79.10 level followed by the $82.50 zone of resistance.

Oil (WTI) Daily Chart

Brent crude oil has mounted a slight pullback after coming within a few ticks of achieving a full retracement of the price gap. The potential for a pullback is building after yesterday’s gains followed by a continued move in early US trading. Support appears around the zone of support at $79.89 and then the 50% retracement of the 2020-2022 major move at $77. Resistance remains all the way at $89 which appears a fair distance away.