Oil price recovers after the steep sell-off on Thursday due to mixed messaging from OPEC+ members.

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• Oil price recovers after the steep sell-off on Thursday due to mixed messaging from OPEC+ members.
• Russia’s Novak says production cuts are unlikely whilst Saudi Oil Minister seems to imply the opposite.
• US Dollar corrects after strong rally, giving Oil a backdraught.

Oil price steadies on Friday after the previous day’s tumble, as traders weigh conflicting messages from two of the largest members of OPEC+ and the US Dollar weakens. Russia’s Deputy Prime Minister Alexander Novak said that he did not think further cuts would be announced, when only a few days earlier, the Saudi Oil Minister, Prince Abdulaziz bin Salman, seemed to suggest the opposite. The next OPEC+ meeting is on June 4.

At the time of writing, WTI Oil is trading in the upper $72s and Brent Crude Oil in the upper $76s.

WTI Oil is in a long-term downtrend from a technical perspective, making successive lower lows. Given the old adage that the trend is your friend, this favors short positions over long positions. WTI Oil is trading below all the major daily Simple Moving Averages (SMA) and all the weekly SMAs except the 200-week, which is at $66.90.

WTI US Oil: Daily Chart

A right-angled triangle has probably finished forming since price recovered from the May 4 YTD lows, as shown by the dotted lines on the chart above.

There is a chance the triangle might break out in either direction, but it is biased to break higher because the top border is very flat (it is right-angled). A breakout higher could see price rise in a volatile rally to a potential target in the $79.70s, calculated by using the usual technical method, which is to take 61.8% of the height of the triangle and extrapolate it from the breakout point higher. Oil price could even go as far as a 100% extrapolation in bullish cases, however, the 61.8% level roughly coincides with the 200-day SMA and the main trendline for the bear market, heightening its importance as a key resistance level.

Assuming Oil price reaches its target, a bullish break would also signify that price had surpassed the $76.85 lower high of April 28, thereby, bringing the dominant bear trend into doubt.

The three green bars in a row that represent the rally this week and the tentative breakout above the topside of the triangle, that accompanied Wednesday’s rally, are a bullish sign. It suggests there is still a chance price could recover after Thursday’s sell-off and eventually continue breaking out higher.

As well as the triangle, the long hammer Japanese candlestick pattern that formed at the May 4 (and year-to-date) lows is a sign that it could be a key strategic bottom.

Further, the mild bullish convergence between price and the Relative Strength Index (RSI) at the March and May 2023 lows – with price making a lower low in May that is not matched by a lower low in RSI – is a sign that bearish pressure is easing.

That said, until Oil price actually climbs above the $76.85 mark, the downtrend is dominant, and there is still a possibility WTI Oil price could break out lower. A decisive piercing below the triangle’s lower border would be required for confirmation, targeting $67.27, which is just above where the 200-week SMA is located and likely to offer good support. Traders might even wish to wait for a break below the lows of the triangle’s Wave B at $69.40 for added confirmation.

WTI US Oil: Weekly Chart

A break below the year-to-date (YTD) lows of $64.31 would be required to re-ignite the downtrend, with the next target at around $62.00 where trough lows from 2021 will come into play, followed by support at $57.50.

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