Crude oil continues to post an intraday advance after media reports that scientists are close to developing a vaccine for coronavirus. Furthermore, there is a slight reduction in the number of new cases in Hubei Province, which is the epicentre of the epidemic in China. These two factors have eased coronavirus fears and are allowing risky assets to assert themselves in Wednesday trading.
However, gains could find themselves capped as a Bloomberg report claims that crude oil refining facilities in China are producing at 25% less capacity due to weaker demand and a shortage of workers who remain shuttered as a result of the coronavirus infection.
Crude oil price on WTI shows a bullish engulfing candlestick formation on the weekly chart, bouncing right off the support line at 49.60. The candle which follows this formation (i.e. this week’s candle) is exerting bullish momentum. If the bullish momentum continues, then we can expect to see a test of 54.15 initially. Further bullish fundamentals are required for the crude oil price on WTI to push higher towards the 58.51 resistance level.
On the flip side, a return of coronavirus fears or failure of OPEC+ to secure further production cuts could cause renewed selling, which could then target the 51.17 resistance or the 49.60 support below it.
The US crude oil inventories could provide further direction on WTI later in the day.