Crude Oil Price Continues Slide to 7-Week Lows on Oversupply Concerns
Crude oil price on the Brent crude oil variant continued its descent to 7-week lows on the back of oversupply concerns as well as global economic growth concerns. Brent crude oil is currently trading at 61.10, well on the way to posting lows not seen since December 3.
Crude oil price on the Brent and WTI varieties have taken a massive hit this week on the back of the risk-off sentiment that was sparked off by the coronavirus outbreak on Monday. Brent crude has lost nearly 14.2% since its January 8, 2020 high at 71.28. The outbreak of coronavirus in China, the world’s 2nd largest importer of crude oil, has clouded prospects of improved demand for the commodity. Repeated forecasts by the International Energy Agency have warned of a contraction in global demand in 2020.
API reported an increase in US supplies by 1.6M barrels last week, and US crude oil inventories posted a 75% drop in the supply shortfalls from a week before. These data all represent bearish fundamentals that are pressurizing crude oil price.
Brent crude broke below the ascending channel earlier in the week and continues its slide towards 60.26, the support level that could mount the first challenge to a continued price drop. A break below 60.26 could bring 58.69 into play as short-term support (previous lows of October 22 and November 1 2019). Another support area lies at 54.47, where a cluster of lows from August to October 2019 is seen.
On the flip side, a bounce on 60.29 could present an opportunity for a short-term pullback towards 63.71 (neckline of June/July 2019 double bottom pattern). A possible pitstop along the way at 62.29 (August 29, September 5 and October 28 2019 highs) cannot be ruled out.