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Crude Has Broken Out of Its Range: What’s Next?

Oil prices

A couple of times over the last few weeks, I have pointed out here that crude was looking for a direction. It has been trading in a narrowing range, and in that situation any breakout beyond the initial support or resistance usually proves quite significant. That is not because of any technical signal, but rather because a breakout in those circumstances suggests that the market has decided where its focus should be. In this case, the problems in banking here in the U.S. and now in Europe with Credit Suisse have grabbed their attention, bringing as it does echoes of 2008.

As a result, crude has broken lower and is trading at levels not seen since the end of 2021. That inevitably prompts the question, how low can it go?

In the short-term at least, the answer to that question can be seen by looking at a two-year chart…

The $61.50 level, marked here by the blue line, is the next logical support for WTI futures (CL). It held three times on retracements in 2021, which is long enough ago to reduce the significance of the level, but three touches of a support do give it some power. Overall, especially given that the breakeven level for quite a few shale wells and fields is around there too, it does look like it could be relevant again should we get there.

Whether we do or not, and more importantly what happens if we do, is probably dependent on factors outside of oil, though. As it stands, the banking problems look to be contained. Credit Suisse has…

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