Oil Drops Sharply, Back to $45.00 Handle

Oil Drops Sharply, Back to $45.00 Handle

2 May 2016, 17:36
Roberto Jacobs

Oil Drops Sharply, Back to $45.00 Handle

As the US session got underway, WTI crude oil futures turned sharply lower, retesting $45.00/barrel mark as investors seems to take some profits off the table after the commodity's sharp rise in April.

Even as the US ISM manufacturing PMI fell short of expectations, the US Dollar gained some strength against its major rivals, dragging commodities (including oil) lower. The US ISM manufacturing PMI unexpectedly fell to 50.8 in April (expected 51.4), indicating a slower pace of expansion in April.

Technical levels to watch

On a sustained weakness below $45.00/barrel mark, the commodity is likely to witness additional pressure, which could drag it to its previous strong resistance, now turned immediate strong support, near $44.30-20 area. With daily RSI reading turning back from slightly overbought conditions, prospects of a corrective move seems higher.

Meanwhile on the upside, crude oil prices need to move back above $45.80-$46.00 mark in order to resume its near-term upward trajectory. Above $46.00 mark, the commodity seems to head back towards Friday's high level resistance near $46.75 ahead of $47.00 round figure mark and Nov. 2015 daily closing high near $47.50-60 resistance levels.


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