Oil price rebound pulls RSI out of oversold territory

Oil Price Outlook

The price of oil appears to have reversed ahead of the December 2021 low ($62.43) as it carves a series of higher highs and lows, with recent developments in the Relative Strength Index (RSI) raising the scope for a larger rebound in crude as the oscillator climbs above 30 to indicate a buy signal.

Oil price rebound pulls RSI out of oversold territory

The price of oil continues to bounce back from a fresh yearly low ($64.36) as the RSI recovers from oversold territory, and the bearish momentum may continue to abate as an unexpected rise in US crude inventories does little to derail the rebound in oil prices.

FOREX.com Economic Calendar

Recent figures from the Energy Information Administration (EIA) show crude stockpiles climbing 1.117M in the week ending March 17 versus forecasts for a 1.448M decline, and it remains to be seen if the Organization of the Petroleum Exporting Countries (OPEC) will respond to the development as the most recent Monthly Oil Market Report (MOMR) states that ‘oil demand continues to be driven by the ongoing recovery in the travel and transportation sectors.’

The March 2023 MOMR goes onto say that ‘oil demand is forecast to grow by a healthy 2.3 mb/d y-o-y in 2023 to average at 101.9 mb/d,’ and the upbeat outlook for crude consumption may encourage OPEC and its allies to retain the current production schedule as ‘China’s reopening, following the lifting of the strict zero-COVID-19 policy, will add considerable momentum to global economic growth.’

With that said, the price of oil may stage a larger recovery ahead of the next Joint Ministerial Monitoring Committee (JMMC) on April 3 as it extends the series of higher highs and lows from the yearly low ($64.36), with recent developments in the RSI reflecting a similar dynamic as it moves away from oversold territory.

Oil Price Chart – WTI Daily

Chart Prepared by David Song, Strategist; Oil Price on TradingView

• The price of oil carves a series of higher highs and lows following the failed attempt to test the December 2021 low ($62.43), with the move above $69.10 (23.6% Fibonacci extension) raising the scope for a move towards $71.50 (38.2% Fibonacci extension).
• The Relative Strength Index (RSI) highlights a similar dynamic as it climbs above 30 to offer a textbook buy signal, with the next area of interest coming in around $72.90 (78.6% Fibonacci retracement) to $73.20 (38.2% Fibonacci extension).
• However, failure to push back above the former-support zone around the February low ($72.25) may curb the recent rebound in the price of oil, with a move below $69.10 (23.6% Fibonacci extension) bringing the yearly low ($64.36) on the radar.

--- Written by David Song, Strategist

Follow me on Twitter at @DavidJSong