WTI crude oil price finished yesterday’s trading higher and even looks bullish now, despite a surge in inventories. The commodity traded steadily higher after opening at $49.99 to close the day at $51.64.
According to the Energy Information Administration (EIA), there was a 7.5 million-barrel build in crude oil inventories for the week ending on February 7. This was significantly more than what market analysts had expected with the consensus at 3.1.million barrels. This news should have been bearish for crude oil price because it suggests that US demand for oil will be dampened because there is still ample supply.
However, news from China that the coronavirus outbreak could be slowing down helped crude oil price finish higher. It’s worth noting, however, that today the tune has changed. The government has just reported 14,840 new cases. It is the largest single-day increase recorded since the outbreak.
Will this weigh down oil?
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Crude Oil Price Outlook
On the 4-hour time frame, we can see that the effect of the news has so far been limited. WTI crude oil price CFDs fell by over a dollar from its Asian session highs to $50.88 following the report. Looking at the big picture, we can even see a bullish setup on the commodity.
Oil failed to sustain a drop below $49.50 after testing this price twice. Consequently, a double bottom chart pattern has formed. In forex trading, this is considered as a bullish chart pattern. A close above last week’s highs at $52.13 would effectively break the neckline resistance. It could then signal that a bigger rally to $54.20 (where crude oil price peaked on January 29) may soon ensue.
On the other hand, a close below today’s Asian session lows could signal that there are not yet enough buyers in the market. WTI crude oil price could then fall back to $49.50 and re-test support.