Oil prices slid 1.6% to USD59 last Friday as focus shifted to a lack of progress in US-China trade talks and underwhelming data from the Germany as well as the US treasury yield curve sinks into inversion path, exacerbated worries over slowing global growth prospects and energy demand. Despite the decline, WTI still ended 0.85% WoW and 29.9% YTD, due to supply cuts by the OPEC and allies, such as Russia, and U.S. sanctions on Iran and Venezuela, easing US stockpiles coupled with dollar weakness amid ultra-dovish Fed. Technically, WTI could witness short term sideways consolidation (with key supports at US$55-57) from overbought positions after hitting YTD high of USD60.4 from Dec low at USD42.3 amid weakening daily technicals.

More downside if support trend line near USD57.4 is violated. Following the 39.1% rally from Dec low, WTI’s near term outlook has turned mildly amid the Doji star pattern and weakening daily technical. A decisive breakdown below USD57.4 (uptrend line support) will trigger further downside towards lower supports at USD55.5 (38.2% FR) and USD53.5 (100D SMA) levels. On the contrary, LT uptrend remains intact to test USD62.8 (50W SMA) and US$63.7 (61.8% FR) levels if WTI can maintain its posture above US$57.4, given the relatively positive weekly technicals.

Source: Hong Leong Investment Bank Research - 25 March 2019