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  • WTIOIL
    70.04 USD -2.02%
  • XAG
    23.96 USD -0.14%
  • XAU
    2010.5 USD 0.48%
  • XCU
    3.73 USD -1.34%
  • XPD
    1478 USD -0.78%
  • XPT
    1048 USD 0.64%
  • ALU
    2243.47 USD -2.23%
  • RICE
    18 USD -1.75%
  • BRENTOIL
    74.17 USD -1.32%
  • SOYBEAN
    14.35 USD -0.66%
  • NG
    2.27 USD 0.27%
  • WHEAT
    256.22 USD -1.15%

Oil set for the most significant weekly decline in multiple months

A very bearish week for oil is set to end with further losses on Friday. Where can the black gold be heading after the weekend?

This week, both oil benchmarks touched their lowest levels in almost a year. Brent was on course for its largest weekly drop since December, of more than 10%, while WTI was on track for its steepest weekly decline since April, of more than 11%.

Volatility due to the troubled banks

The chaos in the US banking sector has kept oil prices under pressure. For example, the First Republic Bank stock fell over 20% in premarket trading on Friday, despite receiving $30 billion from a consortium of major US banks. Meanwhile, SVB Financial Group, the parent company of Silicon Valley Bank, has filed for Chapter 11 bankruptcy, a week after federal regulators were forced to take emergency measures to save the bank.

Moreover, in its most recent monthly oil market assessment, the International Energy Agency upped its estimate of Russian supply by 300 million barrels per day, noting that Russian exports had performed better than anticipated.

You may also read: Natural gas is rebounding slowly after a few days of losses

At a meeting on Thursday, Saudi Arabia and Russia reaffirmed their commitment to the Organization of the Petroleum Exporting Countries (OPEC+) October 2018 deal to reduce production levels by two million barrels per day through the end of 2023.

Chinese demand to save the day

Furthermore, both the OPEC and the International Energy Agency (IEA) have recently reaffirmed their hopes that a rebound in China to record highs this year. Goldman Sachs also raised its forecast for Chinese economic growth in 2023 as the nation reopens following three years of COVID restrictions.

Don’t miss: Coal production rises as China is re-opening mines

On the other hand, US crude stocks increased more than anticipated for the week ending March 10, heightening fears about a decline in demand in the world’s top oil consumer. 11 of the previous 12 weeks have seen an increase in crude stocks, indicating a probable supply surplus in the nation.

The current surplus environment has also meant that US inventories have reached an 18-month high and the market is expected to remain in surplus over 1H23,” analysts at ING said in a note.

Selling pressure to resume?

If oil falls below the lower trend line of the flag formation, which is now above $66, the recent short-term consolidation phase may soon expire. In such a case, crude oil prices may rapidly fall to $65.

Alternately, if mood improves, oil might surge to the top line of the consolidation flag formation, which is now at $70. There aren’t many hopes of re-gaining the $80 area at this moment. The price should remain below the 200 day average of $75.36.

WTI

WTI 2H chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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