Crude oil price wavered today as concerns about demand outweighed signs of tighter supplies from key producers. Brent crude fell by 0.25% while West Texas Intermediate (WTI) declined by about 0.45%. The two benchmarks rose by 9% last week.
Coronavirus concerns remain
As with all commodities, crude oil price moves according to demand and supply. The challenge for crude oil is that the new wave of coronavirus is leading to concerns that demand will take time to recover. Over the weekend, the number of new infections in China rose by more than 40, bringing the new cases reported in the past week to more than 200.
Meanwhile, there are concerns that more cases will start to be reported in the United States. On Saturday, Donald Trump held a rally, in which about 6,000 people attended. A significant number of attendees did not have a mask on. This, coupled with the fact that the country has been protesting, means that the number of cases could continue to rise.
Crude oil price falls as oil rigs
The crude oil price declined after data from Baker Hughes showed that US producers were continuing to slash oil rigs. The number of oil rigs dropped by 10 to 189, which is a significant low considering that the active rigs were more than 600 when the year started.
The risk for crude oil is that more US shale producers could decide to come back to the market to take advantage of these higher prices.
This news came as Chesapeake Energy, once the second-biggest shale producing company headed for bankruptcy. This is after the company missed $13.5 million in payments that were due last week. This has seen Chesapeake share price drop by 96% in the past 12 months, giving it a market valuation of just $124 million. A few years ago, it was valued at more than $14 billion.
On the daily chart, crude oil price has been on an upward trend since bottoming at $15.89 on April 22. The price is now inches below the 50% Fibonacci retracement level ($43.71). This is slightly above the 50-day and 100-day exponential moving averages. Therefore, the bullish trend is likely to continue provided that the price can clear the important resistance at $43.70. If it does, bulls will next target the next psychological level of $45.
On the other hand, a move below $37.13 will invalidate this trend. This price is along the 38.2% retracement and along the 50-day exponential moving averages.