Crude oil-still no clarity

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Crude oil sold off sharply on Friday and is lower in early trade today. Once again, front-month WTI is constrained to the upside by some very obvious and effective resistance around $80 per barrel. This has held firm since crude broke below here in early November last year. However, recent attempts have been accompanied by some positive upside momentum. Yet while the price has briefly breached $80 on a couple of occasions, momentum hasn’t been strong enough for a significant break. Fundamentally, the outlook for demand growth remains uncertain, thanks mainly to a lack of clarity over China’s economy. Geopolitical tensions continue to simmer. On top of this there is the US Presidential Election in November where candidate Trump has expressed an isolationist approach to world affairs. Crude continues to get support from the modest OPEC+ production cuts which now run until the end of June.

With crude banging its head repeatedly on resistance, it feels as if the next significant move will be up rather than down. But we’ve had months of consolidation now, and it maybe that we have more of this to come. Alternatively, we’ve had what looks like a pennant developing this year. If we break below the upwardly-sloping trendline support, that would suggest lower prices this year.