The crude oil price was sharply lower on Tuesday as hopes of further U.S. stimulus gave way to fears of slowing demand from the increase in virus restrictions. Cases continue to rise in Europe and in parts of the U.S. as the Western countries head further into the winter and its typical flu season. Talk of further restrictions in countries such as the U.K. is sowing doubts about the demand recovery and the chances for global GDP growth.
Tuesday’s inventories data from the American Petroleum Institute (API) also weighed on crude prices after a draw of 831,000 barrels for the week. This wasn’t as high as the expected 2.3 million barrels draw, and it was offset by a build in gasoline stocks. The EIA will release its own inventories data later today and this will help to clarify oil stocks, but traders now have an eye on the virus situation and the potential for a build in future inventories.
A supply threat emerged in Norway today as oil workers from the Lederne labour union planned a strike after wage talks failed. The oilfield in question was the Johan Sverdup field, which is owned by Equinor. The field is the third-largest in the Norwegian Continental Shelf with production in the region of 400,000bpd.
The recent rally in the U.S. dollar put a cap on oil prices and although the greenback dipped in the last two sessions, the economic calendar is packed for the rest of the week, with key manufacturing and inflation data coming in ahead of Friday’s Non-Farm Payrolls release.
Crude Oil Technical Outlook
Weakness in crude oil yesterday saw the contract give up the $40.00 level once more and this looks like a double top on the daily chart with the potential to move lower. The first target comes in around $37.00 for crude. A close above the $41.00 level and 50-day moving average would be needed to spur further gains. The ATFX Q4 Market Outlook is available now for free download. Please find it here.