Crude oil price – both the Brent and WTI futures – posted the fourth week of losses amid heightened recession fears and a strong US dollar. The benchmark for US oil – WTI futures -dropped by over 5% on Friday to levels last seen in January. Subsequently, energy became the biggest S&P loser in the just concluded trading week.
What to expect next week
In the coming week, the US dollar will likely remain strong amid an ultra-hawkish Fed and heightened fears of a recession. In its recent interest rate decision, the Fed hinted at continuing with aggressive policy tightening as it strives to deal with the decades-high inflation. Notably, some investors are concerned that an environment of high interest rates will yield oil demand destruction in coming months.
Besides, the UK pound has dropped to levels last recorded in 1985 amid a looming recession. With the US dollar being a conventional safe-haven, woes over the situation in the country and the world at large is set to sustain the currency’s strength. As is the case with other dollar-priced assets, the rallying of the greenback is set to continue weighing on crude oil price.
Crude oil price prediction
Crude oil price recorded its fourth straight week of losses; hitting a level last recorded eight months ago. Brent futures- the benchmark for global oil- ended the week at $86.71 after dropping by 3.93% in Friday’s session.
A look at its daily chart shows that crude oil price is trading below the 25 and 50-day exponential moving averages. Besides, the triangle formation on the RSI indicator shows a convergence below 45. Based on both the fundamental and technical indicators, it will likely remain under pressure into the coming week.
In particular, I expect crude oil price to remain below 95.00 in the short term. Indeed, a move above this level will invalidate this bearish thesis.
To be more precise, the range between the 25-day EMA at 93.23 and the support level of 87.36 will be worth watching in the coming week. Additional pressure from a strong US dollar and recession concerns may give the bears an opportunity to retest January’s low of 85.09.