U.S. West Texas intermediate crude oil futures closed lower for the fourth consecutive week. Prices were dragged down by worries about lower demand in the world’s largest oil importer China, following the coronavirus breakout.
In response to the spreading of the virus breakout, airlines cancelled flights to China, driving airline fuel supply higher and refiner profit-margins lower. Additionally, supply chains across the world’s second largest economy have also been disrupted.
Last week, March WTI crude oil settled at $51.56, down $2.63 or -4.85%.
“The shuttering of airports suggests that there would be at least some demand delay, if not deferred or destroyed,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Weekly Swing Chart Technical Analysis
The main trend is up according to the weekly swing chart, however, momentum is trending lower. The main trend will change to down on a trade through $50.08.
A move through $65.40 will signal a resumption of the uptrend. This is highly unlikely, however, due to the prolonged move down in terms of price, we won’t be surprised by a closing price reversal bottom.
The main range is $71.83 to $45.76. Its retracement zone at $58.80 to $61.87 is major resistance. This area is controlling the longer-term direction of the market.
The short-term range is $45.76 to $65.40. Its retracement zone at $53.26 to $55.48 is potential resistance. However, overcoming this area will signal the return of buyers.
Weekly Swing Chart Technical Forecast
Based on last week’s price action and the close at $51.56, the direction of the March WTI crude oil futures contract this week is likely to be determined by trader reaction to the short-term Fibonacci level at $53.26.
A sustained move under $53.26 will indicate the presence of sellers. If this move is able to generate enough downside momentum then look for the selling to possibly extend into the main bottom at $50.18. This is a potential trigger point for an acceleration to the downside with the next major target the bottom at $45.76 from the week-ending December 28, 2018.
A sustained move over $53.26 will signal the presence of buyers. This could trigger a rebound rally into the short-term 50% level at $55.58. Overcoming this level will indicate the buying is getting stronger with the main 50% level at $58.80 the next potential upside target.
The virus news is bearish but there may be hope for the bulls. OPEC and its allies are scheduled to meet this week to discuss extending its production cuts into June, or increasing the reductions. If they agree then prices could stabilize. But the news should not be enough to trigger a resumption of the uptrend.
This article was originally posted on FX Empire
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