WTI Crude Oil Price Looks Bearish Despite Production Cuts from OPEC+. Here’s Why.
WTI crude oil price CFDs finished yesterday unchanged at $51.05, down from its open price at $51.13, despite the OPEC+ announcing production cuts. The commodity has been heavily hit by the recent coronavirus outbreak. Earlier this week, news broke out that a vaccine could soon be released to the public and helped crude oil price trade higher. However, without further confirmation, most Chinese cities are still on lockdown. This has consequently weighed on demand for crude oil.
In response, the Organization of the Petroleum Exporting Countries and their partner countries (OPEC+) announced that would cut oil supply by 600,000 barrels per day. This news should have been bullish for crude oil because lower supply tends to be positive for price. However, news that Russia may not comply with deeper cuts put the bloc’s credibility in question. Market participants generally feel that OPEC+ will not be able to implement the said reduction.
On the daily time frame, we can see that crude oil price is testing a previous support level for resistance. The $51.00 handle previously provided the commodity with support on February 11, 2019, June 12, 2019, August 6, 2019, and October 3, 2019. Drawing the Fibonacci retracement tool from the high of January 20 to the low of February 4, we can see that price has pulled back to the 23.6% Fib level. Yesterday’s candle even closed as a doji which may be interpreted as a bearish confirmation signal. A close below yesterday’s low at $50.19 could trigger a deeper sell-off on WTI crude oil. The next floor could be at $44.70 where it previously bottomed on December 30 2018.
On the other hand, the 4-hour time frame shows that there were enough buyers in the market to push WTI crude oil price above the falling trend line (from connecting the highs of January 29, January 31, and February 5). If buyers can sustain their initial rally, WTI crude oil price could rally to near-term resistance at $54.20 where the 50% Fib level coincides with the 100 SMA.