WTI oil - The backwardation points to the lower price of oil

In the past three months, we warned investors about the imminent trend reversal in the oil market. Accordingly, we set price targets for USOIL at 100 USD, 95 USD, and 90 USD. Yesterday, our short-term price target of 100 USD was taken out. Due to that, we would like to update our thoughts on USOIL. We continue to be bearish on the asset and expect the volatility to stay persistent throughout the third quarter of 2022. Additionally, we expect the prospect of a global recession and production hikes to impact the price negatively. Our views are also supported by bearish technical developments across daily, weekly, and monthly time frames. Because of that, we would like to update our medium-term price target of 95 USD to the short-term price target; additionally, we would also like to update our long-term price target of 90 USD to the medium-term.

Illustration 1.01

WTI oil dropped approximately 25% from its 2022 high to yesterday's low, entering the bear market territory.

Technical analysis - daily time frame
RSI, MACD, and Stochastic are all bearish. The same applies to DM+ and DM-. The ADX hints at growing bearish momentum. Overall, the daily time frame is bearish.

Illustration 1.02

The picture above shows crude oil futures for September 2022. The market backwardation hints at lower prices for oil in the future.

Technical analysis - weekly time frame
RSI, MACD, Stochastic, DM+, DM- are all bearish. Overall, the weekly time frame is bearish.

Illustration 1.03

Illustration 1.03 shows another oil futures contract, but for January 2023. These contracts trade at far less, near the 87 USD price tag.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

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Our price target of 95 USD was reached.