Crude oil price is down sharply as the market reacts to the new strain of coronavirus and the rising number of oil rigs from the United States. WTI is trading at $47.65 while Brent has dropped by 3% to $50.50.
What happened: Crude oil price has been on a strong upward trend recently because of the optimism of the coronavirus vaccines. The US and UK regulators have already given their thumbs-up about the Pfizer vaccine. The US has also accepted the one developed by Moderna. Therefore, investors believe that these vaccines will boost oil demand.
However, there is a major problem today. Investors are increasingly worried about a new strain of the virus that is spreading in the UK. They worry that the strain could lead to more lockdowns in most countries. Indeed, several countries have already banned travel in and out of the UK.
What else: Another key factor affecting crude oil price is the rising number oil rigs in the United States. In a report released on Friday, Baker Hughes said that the number of rigs rose by 5 to 263. That was the fourth week of gains, implying that US producers are ramping-up production. That could lead to more supply at a period of sluggish demand growth.
What next for crude oil price: On the four-hour chart, we see that WTI has been in an overall upward trend recently. It reached a multi-month high of $49.30 on Friday last week. Today, the price remains above the ascending blue trendline.
It has also formed an ascending channel. Therefore, for the next few days, I suspect that the price will continue moving lower as bears target the lower side of the channel at $47. This prediction will be invalidated if it moves above $49.
Crude oil price chart