Crude oil price is down sharply today as traders react to the rising volatility in the market. Brent, the global benchmark, is down by more than 2.80% while the West Texas Intermediate (WTI) is down by more than 3%. The two are trading at $39.75 and $37.6, respectively.
Crude oil has been under pressure lately as investors have remained concerned about supply and demand. On demand, the rising number of Covid-19 cases in the United States and other European countries has led many watchers to cut their demand forecast for the year. Indeed, recent reports by the Energy Information Administration (EIA) and the International Energy Agency (IEA) have shown that the demand will fall this year.
At the same time, there are concerns that oil supply is continuing. In September, oil traders told Bloomberg that they had started seeing more supply from Iraq. That raised concerns about whether the country was complying with the supply cuts announced in June. Also, Libya is expected to increase its supply in the next few months.
Most importantly, Saudi Arabia has started a price war in some Asian countries. Indeed, according to Reuters, oil supply increased by 160k barrels a day in September.
Most importantly, crude oil price is dropping today because of a stronger US dollar and concerns of Donald Trump’s health and the political risks in the United States.
WTI crude oil price technical outlook
The four-hour chart shows that the WTI crude oil price has dropped sharply today. That has pushed the price below the 25-day exponential moving average. It has also moved below the first and second support levels of the standard pivot points.
Therefore, I suspect that bears will continue to push the price lower as they aim to test the third support at $36. However, if it fails to break below the current second support, bulls are likely to come back and push it to the first support at $38.68. This is also an important level being the September 21 and 30 lows.
Dow Jones Daily Chart