To start the year, analysts were optimistic about oil prices. China’s recovery from Covid was expected to boost demand, supply was expected to tighten in the second half of the year, and when Russia sent troops into Ukraine the sanctions imposed on them were expected to further reduce oil supply. However, China’s recovery was slower than expected, inventory levels have only just started to fall now, seasonals played out weakly, and sanctions on Russia only had a limited impact on reducing supply. All this meant that oil has continually been flirting with key support on the monthly chart marked below.

The monthly support has been held and oil has found a steady level now after the latest OPEC+ meeting. In the meeting, Saudi Energy Minister said OPEC+ will do “whatever is necessary” to support the market. Further news of production cuts from Saudi and Russia helped to underpin the oil market last week. Some analysts are also noting that the cost of storing oil has now increased and this could mean that firms now have an incentive for oil stockpiles to fall. In principle, this could now boost oil prices. So, is the bottom now in for oil prices, or will further fall still occur?

Daily Technical picture

On the daily chart, oil has moved above a key potential trend line marked below.

Oil bulls will need to see the price stay above this level to keep the bullish picture alive. Note too, the 100 and 200 daily EMA’s on the chart as key resistance levels that still sit overhead. The big global narratives are still uncertain with inflation still proving tricky for central banks to manage. So, can oil bottom here? Can risk be easily defined underneath this key daily trend line? Or should a wider stop be used underneath $64? The outlook for oil is uncertain and managing risk will remain key for oil bulls moving forward.