WTI crude oil price has dipped 1% on the day as concerns over global oil demand continue to rise. Modest increases in Chinese PMI data from the NBS and the Caixin indicate that the level of improvements in the economic conditions for manufacturing in the dragon nation have done nothing to ease these concerns.
This price drop also comes against the backdrop of restoration of Saudi oil production, taken out about 2 weeks ago in a drone attack. Bloomberg reports that quoted statements from White House officials on possible limitations on investment flows from the US to China heightened concerns over the US-China trade war. This comes ahead of October’s meeting between both sides.
Last Friday, the Head of the International Energy Agency (IEA) Fatih Birol said that the agency was going to cut its 2019 global oil demand forecasts if the global economy showed more signs of weakness.
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Outlook for Crude Oil Price
China, the world’s second largest oil consumer, is celebrating its October 1 national day with a week long holiday, so this removes a fundamental influence from that angle and puts emphasis firmly on other geopolitical events as well as the weekly US Crude Inventories data.
As I outlined in the last technical outlook for crude oil provided last week, a key support level at 55.73 exists, corresponding to weekly lows for the last week of July. This level needs to be taken out for the downward march to the 23.6% Fibonacci retracement at 54.20 to continue. So far, the daily candle has pushed below this level. The daily candle needs to close with a 3% penetration below this support level for the downside push to be confirmed.
This move also challenges the ascending support trendline and a downside break brings on additional confirmation to the downside bias. A downside push to 52.28 (February 2 and August 8 lows) cannot be ruled out and a break of the 23.6% Fibonacci price level is expected to make this an added possibility.
On the flip side, any recovery in price that takes the WTI crude oil price to the 50% Fibonacci level at 58.53 (July 31 high) could bring 60.67 (July 12 high) into focus. A price break above this level invalidates the downside bias and brings the highs of the last two weeks into focus.