WTI Hits New Multi-Week Lows, Looking for a Test of the $93.50 Level

• Oil prices fell on Thursday, reaching new multi-week lows at $95.50, as bears point to a drop towards $90.
• Early prices should break below the March lows of $93.50.
• The EIA’s massive oil stock release announcements plus technical selling appear to be weighing on sentiment at the moment.

oil prices went down on Thursday, since WTI futures of the first month failed in an attempt the previous session to rally back to $100 and prices subsequently dropped to new lows since March 17 below $95.50. At current levels of $96.50, WTI is trading with losses on the day of just over $1.50, with bears eyeing a test of the March lows in the mid $93.00s.

Non-US EIA nations announced on Wednesday that they would release another 60 million barrels of crude oil, adding to the 180 million barrel stock release announcement made by US officials last week. 15 million of those barrels will come from Japan, the foreign minister there revealed on Thursday. The prospect of all these additional barrels in the near term clearly weighs on crude oil as it reduces the acute threat of a near-term supply shortage as Russian production falls due to sanctions.

Techs noted that WTI made bearish moves on Thursday, confirming a break below a key long-term pennant that had been pressuring price action for the past few weeks. Technical selling could take WTI down to the next key support area around $90/bbl. But analysts have noted that while the IEA’s announced reserve releases — the largest in history — are significant, they are unlikely to offset the more than 2 million barrels per day in production Russia is expected to lose.

A push of even less than $90 could therefore be a big struggle. Indeed, if global supply concerns continue (which seems very likely), a drop to these levels is likely to be seen as a buying opportunity. Some analysts noted that recent reserve release announcements have put upward pressure on crude oil futures scheduled for delivery over six months, given expectations that, following massive reserve releases in the coming months, nations will need to replenish.

This lessens the prospect of a pullback in oil prices later in the year. Meanwhile, other analysts said recent stockpile release announcements make OPEC+ less likely to turn on the taps, despite growing calls from major oil consumers for more output. Meanwhile, proxy talks between the US and Iran to revive the 2015 nuclear deal and remove sanctions limiting crude oil exports from lattes remain stalled, with political decisions reportedly needed in Washington and Tehran. to move things forward.
Apart from massive releases of oil reserves, the only other factor that could ease the global supply constraint is the state of lockdown in China. As the Shanghai lockdown enters its eleventh day, high-frequency flight data showed traffic at its lowest level since early 2020. As the highly virulent variant of Omicron Covid-19 proves difficult to contain, if lockdowns are further extended, poses a major threat to China’s oil demand. Remember that China is the world’s largest consumer of more than 14 million barrels of crude oil per day.

Technical levels