Yesterday oil prices reached a 5-week low. The decline was driven by market concerns about the U.S. default, as well as investors’ forecasts of further rate hikes by the Federal Reserve (Fed).
The downtrend in oil continues today. Yesterday’s lows were updated, opening further downside targets. Fundamental conditions in the oil market are deteriorating.
According to Edward Moya, senior market analyst at OANDA, oil demand from the world’s two largest economies, the U.S. and China, continue to decline. In case of the following deterioration of the macroeconomic background, the fall in oil prices below $70 per barrel is most likely.
China’s economic data show that the country’s manufacturing activity dropped unexpectedly last month. This was the first fall in the manufacturing PMI since December 2021. This fact also put pressure on oil prices.
Fossil fuel divestment initiatives also continue to put oil under pressure.
California regulators approved new rules for all medium- and heavy-duty vehicles on Friday. The carbon dioxide emission level of these vehicles must be zero from 2036. This decision was made the next day after approving the reduced emission standards for locomotives.
These rules also require transitioning existing fleets to zero-emission vehicles. Big rigs, local delivery and government fleets must switch to engines of this kind by 2035, garbage trucks and local buses by 2039, and sleeper cab tractors and specialty vehicles by 2042.
According to the technical analysis, oil updated yesterday’s lows. All Fibonacci support levels have been broken down. There is a way for the price to mid-March local lows. Growth drivers are not helping oil to reverse sustainably. The downside target will be the price of $72.5. A Stop-loss will be set at returning to the resistance level, which corresponds to the price of $77.5.
Brent crude oil prices are likely to decline:
Take profit – 72.5
Stop-loss – 77.5