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  • Oil plummets, sinking more than 4% to its lowest level since early May
  • Concerns about the energy market outlook, coupled with OPEC+’s internal strife, weigh on prices
  • This article looks at key WTI technical levels to watch in the coming days

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Crude oil prices (WTI futures) plunged on Tuesday, falling more than 4% to $69.65 per barrel, undermined by heightened uncertainty over demand prospects amid increasing global headwinds, including slowing growth, rising rates and OPEC+ infighting.

While the removal of China’s coronavirus restrictions earlier in the year was seen as a game changer for fossil fuels, the reopening of the Asian economy has fallen short of expectations, with economic activity flattening out in recent weeks.

Swelling supplies from Russia also appears to be weighing on the commodity. Although OPEC+ slashed output a couple of months ago, Russia has continued to pump huge volumes of crude in an effort to maximize its revenues, reneging on its promise to throttle production.

The OPEC+ internal strife may prevent the cartel from further reducing quotas at the June meeting, as many members may voice opposition to such a move given recent developments. This situation may keep physical markets in surplus during the second half of 2023, especially if the global economy takes a turn to the downside.

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Related: Crude Oil Dips as US Dollar Steadies with a Pending Debt Deal Vote. Where to for WTI?

The Fed’s policy outlook is complicating matters for oil. A few weeks ago, traders were convinced that policymakers would hit the pause button next month, but expectations have since shifted in a more hawkish direction, with Wall Street starting to lean in favor of another 25 basis point hike.

Although the U.S. economy has remained resilient, investors are forward-looking, which means they are more concerned about what might happen down the road rather than today. In this context, the more rates rise, the worse the economy and cyclical commodities will perform over the medium term.

In terms of technical analysis, oil is hovering above an important support zone near $69.40 after Tuesday’s selloff. If bears manage to push prices below this floor in the coming days, we could see a move toward the psychological $66.00 level in short order.

On the flip side, if WTI establishes a base around current levels and turns higher, initial resistance lies at $74.00. Upside clearance of this ceiling could open the door for a rally toward $76.50, followed by $79.00, just a touch below the 200-day simple moving average.

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WTI Oil Futures Chart Prepared Using TradingView

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