Crude oil price declined slightly as worries of more coronavirus cases outweighed the resurgence of the global economy. At 06:00 GMT, the price of West Texas Intermediate (WTI) and Brent declined by more than 1.11% and are trading at $40.20 and $42.69, respectively.
Demand challenges remain
The demand of crude oil has been rising after it dropped sharply in March, April, and May. However, the demand has been in an upward trend in the past few weeks as the world economy has slowly returned to growth.
For example, data released this week showed that manufacturing PMI in Europe, China, and the US rebounded in June. That was the second straight month of gains, which is a signal that more people are travelling. And another data released today showed that the services sector in Australia, China, and Singapore have also rebounded.
Meanwhile, in the United States, more people have been venturing out. This is evidenced by the recent jump in retail sales and the upbeat nonfarm payroll numbers that were released yesterday.
However, there are reasons to be worried about demand. First, the number of coronavirus cases in the United States has been rising sharply in the past few weeks. Just yesterday, the country confirmed more than 50,000 new cases for a second day in a row. Worse, transatlantic travel will not return in the near future. In a list released this week, the European Union barred the US from accessing the region. The same has happened in China. In a statement, ANZ said:
“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery.”
At the same time, there are concerns that supply will not match this falling demand. That is because the current OPEC+ cuts did not anticipate a situation where a second wave of coronavirus remained. Also, there are concerns about compliance with the cuts. In a recent report, the Wall Street Journal said that Saudi Arabia was concerned about lack of compliance from Nigeria and Angola.
Crude oil price technical analysis
WTI crude oil price is trading slightly above $40 per barrel. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. The price is also along the 61.8% Fibonacci retracement level. This retracement was drawn by joining the highest point in January and the lowest level this year. Therefore, the price is likely to continue rallying as bulls attempt to move above the next resistance leve at $45.
On the flip side, a decline below $36 will invalidate this prediction. This price is along the 100-day exponential moving average.