Oil Continues to Drop

The price of oil fell sharply by nearly 5 per cent on Tuesday after comments that Saudis are ready to boost production to counterbalance missing barrels from Iran. This has caused a panic sell-off and the WTI benchmark dropped more than 3 USD. The price of oil was trying to consolidate on Wednesday and it was 0.30 per cent stronger during the London session, trading at around 66.30 USD.

The price dropped below the important level of 67.25 USD, where previous lows were converged with the 200-day moving average. The trend, therefore, switched to bearish and oil is now officially located in the correction territory, as the commodity is down 14 per cent from its October highs.

Bears will probably defend the mentioned level of 67.25 USD and if this resistance falls, further rise toward the 100-day moving average at 69.60 USD could occur.

On the downside, bulls are trying to hold the bullish trend line near yesterday's lows at 65.80 USD and if this support cracks, another stronger demand zone could be at June and August lows near 64.40 USD. The outlook seems bearish, as long as oil trades below 67.25 USD. Also, the outlook points to the possibility of rallies being sold.

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