Crude oil price has pared back yesterday’s losses as traders buy the dips after the significant losses experienced yesterday. Brent, the international benchmark, is up by 0.65% and is trading at $41.10. West Texas Intermediate (WTI), on the other hand, has jumped by 0.62% and is trading at $38.80.
The price is jumping for four main reasons. First, there are those who believe that the price of oil will bounce back after falling sharply yesterday. Second, it is reacting to the relatively strong industrial profit data from China. According to the statistics bureau, the profits rose by 10.10% in September, after rising by 19.10% in August. This implies that the Chinese economy continued to do well.
Third, crude oil price is rising because of the overall weaker US dollar. The dollar index has fallen by 0.10%. Finally, traders are reacting to news that some American producers have started lowering production as a hurricane approached the Gulf of Mexico.
Still, investors are worried about demand as the number of Covid-19 cases rise around the world. In the United States, the seven-day average of cases has jumped to the highest level in months. The number of hospitalisations has also jumped. The same trend is happening in Europe, where countries like Norway, Spain, and France have moved to implement restrictions.
The biggest demand concern is that air travel, which is a major consumer of oil will not return any time soon. Another concern is that OPEC and its partners have not signaled that it will lower production. Indeed, production in some members, like Libya, has been on an upward trend.
Brent crude oil price technical outlook
On the daily chart, we see that Brent crude oil price has been in a tight range recently. The price has struggled moving above $46.5, which is the 38.2% Fibonacci retracement level. It has also formed an equidistance channel that is shown in green. The price has also moved below the 25-day and 15-day exponential moving averages.
Therefore, in the immediate near term, the price will likely break out lower because of the bearish buildup that is shown in orange. However, for today, it will likely remain in the current consolidation phase.
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Brent crude oil price technical chart
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