Oil Closes the Worst Week Since June, As G7 Plans A Price Cap on Russian Oil This Week

Crude Oil turned bearish in June as central banks picked up the game with rate hikes, particularly the FED, which hurt the sentiment for risk assets, as the global economy headed into recession. The coronavirus lockdowns and other restrictions in China also hurt the sentiment during summer, but since early October we have seen a decent fight by Oil bulls, as Oil found support at the 100 SMA (green) on the daily chart.

During October we saw a bounce and Oil gained nearly $20 as the USD weakened and risk sentiment improved due to the CFED giving dovish signals about slowing down with rate hikes, while China was giving signals of reopening. Although, the 50 SMA (yellow) which had been acting as support before turned into resistance together with the 20 SMA (gray).

WTI Oil Daily Chart – The 100 SMA Is Under Attack Again

The 20 and 50 SMAs turned into resistance at the top for crude Oil

These moving averages started rejecting the price last week and on Friday we saw a collapse in Oil prices, with WTI crude losing around $13 as the price fell to $77 lows, although we saw a comeback in the last few hours of Friday and the price closed around $80.

The weakness in crude this week reflects worries about further Covid lockdowns in China after positive comments last week about reopening fully. FED’s Collins said on Friday that the FED will likely need to hike interest rates further and after hiking, interest rates need to stay there for some time, which is a very hawkish comment, adding to the weakness in crude Oil.

Besides that, the G7 is planning to announce a price cap on Russian Oil on Wednesday. But at what level will the G7 set the price cap? We have heard rumours about a price cap at $60 or even lower. Although Russia is already selling its crude Oil at a discount to the UK Brent crude, so I wouldn’t rule out a cap at $50 or $55.

WTI