Ahead of Wednesday’s crude oil inventories report, crude oil price on the Brent crude benchmark witnessed some heavy selling after demand concerns resurfaced following a new spike of coronavirus cases in several net importer countries in Asia.
The major demand concerns arose after coronavirus cases spiked in India and Japan. India is the world’s third-largest net crude importer. On Tuesday, the American Petroleum Institute (API) reported that crude oil inventories in the US showed a surprise jump.
Also adding to the bearish tone on risky commodities this Wednesday was the modest recovery in the US Dollar on the day. These factors meant that Brent crude sold off sharply for the 2nd day in a row, shedding 0.63% on the day. This followed yesterday’s 1.19% selloff and sent Brent crude tumbling to 1-month lows.
In an hour, the US Energy Information Administration (EIA) reports its version of the crude oil inventories. The markets are expecting a slide of 3.7million barrels for the week ended April 16.
Technical Outlook for Crude Oil Price
Crude oil price has extended its downward move on the Brent crude benchmark, following a rejection at the junction of the 66.81 resistance and the upper border of the bearish flag pattern. The price action is expected to continue the decline as bears target the breakdown resolution of the bearish flag. If crude oil price is forced down below the flag as part of the resolution move, we expect that price support levels at 65.95, 64.26 and 62.21 will be taken out. The measured move from a breakdown should be able to target the 57.47 support level. This move would also need to take out the 60.07 psychological support level.
On the other hand, a bounce at 64.26 and subsequent return to the upside will retest the 65.95 and 66.81 price levels. Only a break above 67.74, where the flag’s upper border rests. This scenario will invalidate the bearish flag and allow for a push towards the 70.00 psychological resistance. Further ascent may allow bulls to retake the 71.44 price level, with 73.34 also coming into the picture.