WTI crude oil price CFDs are up close to $1 from its Asian session lows as market sentiment has improved. As of this writing, the commodity is trading around $50.62.
Contrary to gold, crude oil price has been trading lower lately as fears of the coronavirus outbreak dampened demand for it. It is said that China already reduced its orders for crude oil from Saudi Arabia. According to Bloomberg, Chinese demand is consequently estimated to fall by 20% compared to last year. This is equivalent to around 3 million barrels per day! It can be attributed to limited travel and business disruptions caused by lockdowns in some Chinese cities.
This morning’s price action on WTI crude oil is attributed to improving market sentiment triggered by the lack of significant updates on the coronavirus update. The latest data shows that there are already 20,613 confirmed cases and 427 deaths from the infection. Although the numbers are staggering, they come as no surprise to market participants. We already reported weeks before that the coronavirus could infect millions in a month.
It may have also helped crude oil price that the PBoC or China’s central bank stepped in yesterday to stimulate the economy. It injected $170 billion into China’s financial system in an effort to support growth.
On the hourly chart of WTI crude oil price CFDs, we can see that the commodity has bounced off support at the $50.00 handle. It has made its way to the area between the 38.2% and 50% Fib levels (when you draw the Fibonacci retracement tool from yesterday’s high to its swing low). Crude oil price has some more room to trade higher. When you connect the highs of January 31 and February 3, we can see that there is trend line resistance around $51.00. This price also coincides with the 61.8% Fib level. If there are enough buyers to push WTI crude oil price above this handle, it could trade to around $52.30. There’s a confluence of resistance here. It is where the medium term trend line (from connecting the highs of January 29 and January 31) and the 100 SMA are.
On the other hand, a strong bearish candle may indicate that crude oil price could still drop to its 13-month lows at $49.62.