- The West Texas Intermediate Crude Oil market initially rallied during the trading session on Monday but gave back early gains as we continue to see a lot of negativities out there when it comes to energy markets overall.
- The biggest concern of course is going to be whether demand will pick up because we are heading into a global recession.
- That obviously can have a negative effect on pricing power, and it’s probably worth noting that the $75 level has offered a bit of psychology as well. Because of this, anticipate that the market may continue to struggle in the short term.
Another thing the need to keep in mind is that liquidity is dying off at the end of the year, as we are into the holiday season. The closer we get to Christmas and New Year’s Day, the more likely it is to see a severe drop off in liquidity. We have just started Hanukkah so that obviously comes into play as well. With that being the case, I think it’s very likely to be a situation where we drove around somewhat aimlessly, but we may have more of a “fade the rally” type of attitude over the next couple of weeks.
I Remain Cautious
The 50-Day EMA sits above the $80 level and is dropping somewhat, so I do think that we have a situation where the market is likely to continue to find plenty of sellers. This is not necessarily to say that I would be aggressive one way or the other, just that I think that there is a general lack of interest in the market.
All, the reality in the physical market is much different. Supplies are getting tight, so one would have to think that we are closer to the bottom than not when it comes to the downturn. However, we have not seen the market try to price that end, and with so many questions about the Chinese reopening, a lot of people don’t know what to do. This might be a story for January, but right now I think we’re just looking at a market that has no real catalyst to move one way or the other, at least not in the short term. I remain cautious.
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