WTI is coming under intense pressure on Wednesday, down almost 4% on the day at the time of writing, and further losses could be in store.
WTI has pierced last year’s lows to trade at the lowest level since 13 February 2009, a move that could prompt further losses in the coming sessions, with further technical support appearing not far below at $32.30.
What makes this continued bearish bias all the more significant was the apparent increase in geopolitical risk following Saudi Arabia’s decision to sever diplomatic ties with Iran, which once upon a time may have been bullish for oil. Saudi Arabia is the world’s largest exporter of oil while Iran is expected to resume exports this year so any potential conflict could result in supply disruptions.
The fact that crude has continued to slide suggests two things, people are more concerned with the ongoing oversupply story and the potential for supply disruptions is believed to be very slim.
The next support level at $32.30 will be very significant as a break of this would take WTI to levels not seen since December 2003 and ever closer to the psychologically important $30 a barrel level.
Should WTI fail to withstand a move below $34, despite already trading briefly below it, resistance should remain to the upside between $37.20 and $38, where it has failed to break above in almost a month.
Additional resistance could also be found above here from the descending trend line – 25 June 2014 highs – and the 55-day simple moving average.