Crude oil price declined by almost 1% as investors worried about global demand as the number of coronavirus infections continued to rise. Brent, the international benchmark, is down by 0.75% to $44 while West Texas Intermediate (WTI) is down by more than 0.80%.
The biggest concern for crude oil market today is the rising tensions between the US and China and the rising number of coronavirus cases in several countries. As I have written before, the US ordered companies to stop doing any business with Tik Tok and WeChat. And, according to Reuters, the country is in a process of ramping up pressure against other Chinese companies.
At the same time, the US has started another trade conflict with Canada, a month after the two countries passed the USMCA agreement. Mr. Trump said that the US will start levying a 10% tariff on Canadian aluminium in order to save American jobs.
A trade war between the US and Canada, coupled with a conflict between the US and China would be net negative for crude oil price because it would affect demand. Worse, this is happening amid a global pandemic.
Meanwhile, crude oil price is falling because of the rising number of coronavirus cases. Earlier today, data from India showed that the number of cases jumped sharply. The same theme is happening in Australia and the US.
Brent crude oil technical forecast
The daily chart below shows that Brent crude oil price has been consolidating in the past few days. The price has found significant resistance at the 200-day EMA and above the 50% Fibonacci retracement level. Also, the price is above the 50-day EMA.
Most importantly, the crude oil price is forming a rising wedge pattern, which is usually bearish in nature. This wedge is nearing its tip, as shown by the two blue trend lines. Therefore, I expect that the price will break out lower in the near term. If it does, the key support will be $40, which is slightly below the 50-day EMA.
On the flip side, a move above $48 will invalidate this trend. This price is slightly below the 61.8% retracement level of $50.