The oil price drops below the $60 level – is this still just a correction or a new downtrend?
Crude oil lost 2.63% on Tuesday, nearing the $60 level and extending its short-term downtrend. Today it's continuing to weaken, falling another 1.2% as markets digest disappointing economic data including the ADP report coming in lower than expected at +62,000 and Advance GDP showing -0.3% quarter over quarter.
For oil markets specifically, these developments are worth monitoring:
- Oil prices are set for their largest monthly drop in over three years, with WTI down nearly 16% for April - its worst monthly performance since November 2021.
- Data from the American Petroleum Institute indicated that U.S. oil inventories grew 3.76 million barrels in the past week, substantially more than expectations for a build of about 0.39 million barrels.
- The OPEC+ meeting next week is drawing attention, with the cartel widely expected to announce output hikes for June, potentially adding more supply to an already pressured market.
- Markets remain highly sensitive to news, with oil trading largely following broader market sentiment.
Conclusion
Crude oil continues its decline, breaking below the psychologically important $60 level. The commodity is showing relative weakness compared to other markets amid growing supply concerns and uncertain demand outlook.
For now, my short-term outlook is neutral.
I think that no positions are justified from the risk/reward point of view.
Here’s the breakdown:
- Today's 1.2% decline extends Tuesday's significant 2.63% loss, establishing a short-term downtrend.
- Weak economic data, including disappointing ADP employment figures and negative GDP growth, raise concerns about future demand.
- U.S.-China trade uncertainty and potential OPEC+ supply increases pose downside risks.
- The ongoing Ukraine peace talks add another layer of geopolitical uncertainty.
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Thank you.
Paul Rejczak,
Stock Trading Strategist