Further upside in crude oil price appears increasingly uncertain as coronavirus fears continue to linger despite data from China’s National Health Commission showing a drop in the number of new infections.
The recovery of crude oil price beyond $52 appears uncertain in Monday trading. Bulls continue to seem wary of the coronavirus impact on crude oil demand. The WTI blend is trading at 52.04 today, slightly off intraday highs after last week’s bullish run failed to push ahead with greater conviction in the first trading sessions of the week.
Data from the CME Group show a decline in volume by 310,000 contracts, with open interest also dropping by about 41,000 deals on Friday, indicating some bit of short coverings behind the upside. This may have capped prices at present levels on the day.
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Technical Outlook for Crude Oil Price
Crude oil price action on the WTI shows the formation of a W harmonic pattern. While the price has breached the neckline successfully, it has not been able to overcome the previous low of 27 Jan and the prior high of 5 Feb. These levels must be broken to open the pathway towards further recovery.
Failure to break the high price of 5 Feb may open the door for a resumption of further downside on the pair, and a resurfacing of risk-off sentiment could confirm this move. Downside targets remain at 51.17 and 49.60 (double bottom of “W” pattern and 27 Nov 2018 low).
If crude oil price on the WTI blend succeeds in breaching the 5 Feb high, then a recovery towards 54.15 is possible, with 55.65 coming into focus if the recovery move is strong. Further upside targets lie close to the $59 mark.
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