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The primary reason for the drop in price is the economic slowdown that has become prevalent in the global market. As fears of a recession continue to grow, the price of Oil has continued to drop. To make matters worse, the G7 have set a $60 per barrel price cap. This price cap was created to restrict Russia’s ability generate revenue from its oil exports by making the G7 Oil more competitive. From a fundamental perspective this may push the price lower towards the price cap. On the contrary, Russia has threatened to reduce its supply which would force the price to rise. The situation remains volatile and subject to geopolitical shifts.
From a technical perspective the price of Brent Oil is now at its lowest level for the year and below the levels prior to the Russia and Ukraine war. The price is also now well below the 200 day and 50 day moving averages and is dropping at a fast rate. The price is currently resting on the $76 support levels with the next point of support at $70. If this level fails, as stated above the logical support is $60 based on the price cap. It is also interesting to note that the price of Brent is at its lowest RSI level since December 2021. In recent times every time since 2022, it has been this low the price has bounced in the short term. On the weekly chart, the price is very similar although the RSI has more room to go before it hits the oversold level. This indicates that there may be more of a sell off before a bounce occurs.
With global volatility still high and fears of a recession continuing to grow, the price of oil may continue to fall.
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