The oil market is on a tear this year, but prices’ long rally is starting to look as if it might need a rest.
The Organization of Petroleum Exporting Countries will convene later for a scheduled meeting. Its delegates are likely to be content with recent oil-market action, which has seen prices rise consistently since December. Forecasters think they’ll be inclined to stick with the price-boosting output reductions currently in place.
Meanwhile, conflict between Israel and Hamas retains the potential to restrict oil supply from the Middle East, either via the conflict itself spilling over to other regional powers such as Iran or via the consistent attacks on shipping by Yemeni Militants. The ongoingOf course, higher oil prices will feed into the inflation mix at a time when broader markets, and Western consumers, are hoping for tamer prices and near-term interest rate cuts.
Given the speed and magnitude of recent gains, it’s not a stretch to imagine that this rally is getting a little tired, even if that doesn’t mean that major falls are in the offing. Sure enough, WTI’s Relative Strength Index now sits uncomfortably above the 70.0 level which signals a significantly overbought market. It stood at 71.8 on Wednesday morning.
Still, momentum remains firmly with the bulls and seems likely to continue to do so even if some profit-taking stunts the current rally.Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Forex trading involves risk. Losses can exceed deposits.
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