Oil price  prediction after dropping -36% in the last 12 months

The COVID-19 pandemic and the war in Ukraine have led to an acute energy crisis. As a result, gas and oil prices soared, bringing inflation into the spotlight and creating a challenging environment for governments and central banks to cope with the new reality.

But the crisis eased lately, and with it, the oil price. Several factors contributed to it, such as the Chinese economy being closed or the fear of a global recession.

Now, China’s economy is reopening after the COVID-19 zero policy ended. Also, both the United States and Europe have avoided recessions.

Moreover, the International Energy Agency (IEA) has raised its forecast for global oil demand. All these should contribute to a tight oil market and favor higher oil prices.

As the 2023 International Energy Week ended in London, a survey of several hundred people showed a bullish bias for oil prices.

Yet, the price of oil remains depressed. The WTI crude oil price is down -4.37% YTD and almost -36% in the last 12 months.

So what is weighing on oil prices? Could it be that the market starts pricing the effects of the global energy transition? It is too soon to find out the real reason why oil prices remain depressed under the conditions mentioned above, and so the one way to understand the current price developments is to look at the oil price chart.

All eyes are on the $70 area

After peaking at the $120/barrel area, the WTI crude oil price began a bearish trend. A series of lower lows and lower highs confirms the bearish sentiment.

The technical trader can spot a contracting triangle at the top, acting as a reversal pattern. Currently, the market has found support above the pivotal $70/barrel area, where another triangular pattern can be spotted.

There is no way of knowing the direction the price will break out of the triangle, as it may act as a continuation or as a reversal pattern. But one thing is clear, and that is the role of the $70/barrel area.

A move below implies more weakness.

As almost everyone is bullish, it would be the ultimate contrarian indicator of a market that fails to do what the consensus says. It would not be the first time, and surely, not the last time that the market does the opposite.