Oil prices have been on a tear higher in the last couple of years. After dipping into negative territory at the start of the COVID-19 pandemic, oil bounced and traded above $120/barrel in just two years.
In other words, from negative $40/barrel, where future contracts settled in April 2020, to positive $120/barrel two years after.
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The rise in oil prices brought fortunes to oil companies. But it also brought pain to consumers worldwide because the side effect of high oil prices is rising inflation.
Inflation is on everyone’s lips these days. It had reached almost double-digit territory in the United Kingdom, for example.
Also, inflation is mainly the reason why central banks, starting with the Federal Reserve of the United States, have engaged in a race to tighten financial conditions. Because central banks lag behind the inflation trend, the immediate result will be a recession, everyone talks about now.
So the news that the WTI crude oil price dropped below $80/barrel after trading above $120/barrel at the start of this summer should be good news.
But what comes next?
All eyes are on the $60/barrel area
WTI crude oil made a double top pattern above $120/barrel this year. However, since then, a bearish trend has started.
The bearish sentiment amplified with the drop below $100/barrel. The double top’s neckline lies around the level, and the market retested it shortly after the bearish break.
The rejection that followed proved decisive. With no support in sight, expect the WTI crude oil price’s decline to continue and to try a move below $60/barrel. A break there would put further pressure on oil, although a bounce to the $80/barrel should not be discounted.
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