WTI returns below $79.00 and threatens to sink back into congestion

• Overloaded crude oil markets retreat despite OPEC expansion.
• The markets collect profits and withdraw offers.
• Fed rate expectations and lack of OPEC production limit gains.

US West Texas Intermediate (WTI) crude oil weakened on Monday, testing below $79.00 per barrel, with markets pulling back following the recent bullish rally from short-term congestion that has seen barrel supplies slowly rise.

The Organization of the Petroleum Exporting Countries (OPEC) formally announced that it would extend production cuts from the first quarter into the second, and possibly longer if necessary. Markets have largely priced in OPEC's production cap extension, and the announcement has failed to generate bullish momentum in oil.

Major non-OPEC crude oil producers, specifically the United States, have continued to outperform market expectations. The US is producing record amounts of crude oil, and US crude oil reserves have been flooding refinery supply lines recently, keeping crude oil's bullish momentum limited.

Markets continue to be pressured by expectations of rate cuts from the Federal Reserve (Fed), which maintains downward risk appetite and contributes to reducing barrel supplies. Markets are also getting used to geopolitical headlines from both the Gaza conflict between Israel and Hamas, and concerns over supply lines stemming from attacks by Houthi rebels in the Red Sea, which are becoming normal.

WTI Technical Outlook

Monday's bearish pullback in US WTI crude oil saw the barrel lose the $79.00 level, with price pressures pointing to the downside despite recent price action higher from the week's swing low passed at $76.00.

Daily candles are re-touching the 200-day SMA range at $77.75, WTI bidders have a growing hill to climb as bids fall back below January high at $79.20 .

WTI hourly chart

WTI daily chart