Hi there and thank you for posting your dream. Can you provide any other details? What did the pencil look like? Was it a standard yellow #2 pencil? Of a different color? Wood and graphic pencil or a mechanical pencil? Was it a brand new pencil or used? How long or how short?
You mentioned that you were talking about the pencil. What were you saying about the pencil? Were you concerned that it wasn't writing well? What feelings did you experience about this? Happy to have the pencil? Angry that it wasn't sharp?
Not all pencils are the same, and those details can provide further clues to what your dream is trying to tell you.
Also, consider what a pencil is used for. To communicate. To make a point. How does a pencil differ from other writing instruments? Could you see what you were writing?
It's a tad too shallow an interpretation to say that the pencil dream simply means you need to be more flexible; that is very general. But since it feels right to you, "considering what's been going on lately with" you, then perhaps it is the right interpretation for you.