Brent crude oil prices rebounded Thursday, currently trading up more than 1% to US$72.56, following a Wall Street Journal report that big banks including JPMorgan Chase and Morgan Stanley were in talks for a possible capital injection into First Republic Bank.
US regional bank liquidity issues, related to the collapse of both Silicon Valley Bank and Signature Bank, have contributed to the 11% downward spiral in Bent crude prices in the past month.
Forex Trading market analyst Fawad Razaqzada, though, noted that oil prices have been weighed down by at least three major factors in recent days: general risk-off sentiment; weaker demand projections for oil and technical selling.
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All this has Razaqzada wondering if OPEC will step in to save oil prices again by cutting its production.
“The ball's in their court now, but for now, thanks to the big breakdown, the path of least resistance is clearly to the downside for oil,” Razaqzada said.
“Granted, we might see an oversold bounce in prices soon, but until something changes fundamentally to create a higher high for oil, we would continue to favour selling into resistance than fading the dips,” he added.
Should OPEC fail to act, the Forex Trading market analyst thinks the next potential downside target for Brent could be US$70, with key resistance on the upside seen between $75 and $76.60.
HYCM chief market analyst, consulting Giles Coghlan, however, noted that shareholders of major oil companies shouldn't be too concerned due to a strong, longer-term demand outlook.
“The International Energy Agency (IEA) report last month saw oil demand rising by 2 million barrels per day (bpd) in 2023 which was +200,000 bpd from the prior reading…that will further enhance the upside outlook for oil,” Coghlan said as reported by Yahoo Finance.
As a result, a medium-term bull case remains for oil and the dip could also be an opportunity for buyers, he added.
Contact Sean at sean@proactiveinvestors.com