Crude oil price is nervous today as traders continued to worry about supply and the health of the global economy. Brent and WTI spot prices are down by more than 3%, adding to the more than 3% losses that were made yesterday.
Supply concerns remain
The biggest concerns that traders have are about supply. This is after data from the American Petroleum Institute (API) and Energy Information Administration (EIA) showed that build-up in US crude was increasing. On Tuesday, data from the API showed that inventories rose by more than 8 million barrels in the previous week. Another data from the EIA confirmed this, saying that inventories rose by more than 5 million barrels in the previous week.
All this comes a few days after Saudi Arabia took a U-turn on voluntary cuts. On Monday, the country’s energy minister said that it would end its voluntary cuts at the end of the month. This was a significant issue for crude oil price because it will lead to more supplies.
Also, there are serious concerns about cheating among OPEC+ members. Just last week, Saudi Arabia and Russia reprimanded Iraq for cheating. Other countries that were cheating were Nigeria, Kazakhstan, and Angola. While the countries have committed to comply, there is no evidence that they will.
Finally, another supply concern for crude oil price is that American shale producers will come back online as the price climbs.
Meanwhile, supply is expected to be a bit sluggish because of the state of the world economy. In its economic outlook yesterday, the OECD said that it expected the world economy to go through the worst contraction in modern times. Later on, the Federal Reserve said that it expected the US economy to remain weak for the next two years. All these are not conducive for crude oil prices.
On the daily chart, Brent crude oil price is slightly above the 50% Fibonacci retracement level at $38.08. The price is also slightly above the 100-day exponential moving average and above the ascending blue trendline. This pattern indicates that the price of crude oil may rise again as bulls attempt to move above this month’s high of $43.
On the flip side, a move below $40, the ascending trendline, and the 50% retracement at $38 will invalidate this trend.