U.S. crude has fallen for a fourth successive day. Currently, WTI crude oil is trading at $55.35, down $0.78 or 1.37% on the day. March Brent crude oil is trading at $61.82, down $0.80 or 1.28 percent. Earlier on Wednesday, U.S. crude slipped below the $56 level for the first time since early December.
Chinese Virus Scares Markets
As a Chinese virus continues to spread, investors have become increasingly alarmed. The coronavirus, which can have pneumonia-like symptoms and can be lethal, originated in China, but the U.S. reported its first case on Tuesday. Global stock markets are down, as there are widespread concerns that the virus could cause a mass epidemic. At the same time, China has taken concrete measures to contain the virus, and investors are hopeful that the coronavirus will not be a repeat of the deadly SARS virus in 2003, which cost the Chinese economy between 0.5% and 2.0% of China’s GDP. Oil prices have also taken a hit, as U.S. crude plunged on Wednesday by some 3.6 percent and continues to fall on Thursday.
Oversupply Concerns Weigh on Oil Prices
Another factor weighing on oil prices are concerns that supplies continue to outstrip demand. On Wednesday, the International Energy Agency released a bearish surplus forecast for oil, stating that it expects a surplus of 1 million barrels per day on global markets in the first half of 2020. Tensions in the Persian Gulf have also receded, after the recent skirmish between Iran and the United States. Robert Yawger, director of energy at Mizuho Securities USA, wrote on Tuesday that “there is simply too much global supply, and too little global demand for Middle East crude oil to rally the market like it is 1999”.
The Energy Information Administration (EIA) weekly inventory report is an important gauge of supply and demand for U.S. crude. Out of the past five reports, four have indicated declines, which points to increased demand and has put upward pressure on oil prices. The upcoming estimate, which will be released later on Thursday, stands at a negligible -0.1 million, but an unexpected reading could affect U.S. crude prices.
U.S. crude continues to break support levels as a result of its sharp decline. After breaking below support at 57.25 on Wednesday, crude has broken through support at 56.00 in the Asian session. Below, we find support at 55.20, which is under pressure. The next major support level is at $53.50. On the upside, the 50-EMA is situated at 58.75, followed by major resistance at the 60.00 level.
This article was originally posted on FX Empire
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