Crude Oil Price Clings to Support as Demand Outlook Dwindles

Crude Oil Price Forecast:

Crude Oil Price Clings to Support as Demand Outlook Dwindles

Crude oil has suffered a string of declines to start the year and stands on the threshold of bear market territory as a result. While coronavirus concerns have finally started to eat away at other growth-sensitive assets like the Nasdaq and Dow Jones, crude oil was one of the earlier casualties which could allow it to have a more measured response to the recent sessions of risk aversion. Further still, traders may be hesitant to commit to one direction or another ahead of the upcoming OPEC meeting on March 5 which may allow crude to consolidate further.

With the fundamental factors remain in constant flux, technical support around $50 is lent notable influence. Doubling as a psychological level, the line has been able to stall various declines in the past and helped buoy price throughout early February. With that said, slowing global travel and economic activity have dealt an undeniable blow to crude oil demand and if OPEC cannot agree to reduce supply, the commodity may continue lower regardless of the technical level.

Crude Oil Price Chart: Daily Time Frame (January 2019 – February 2020)

Similarly, crude oil may enjoy gains if coronavirus concerns are remedied sooner than anticipated or the market experiences a broader resurgence in risk appetite – one that would have to be founded on a fundamental improvement elsewhere. Consequently, it seems crude oil remains vulnerable and attempts to push price higher may be short lived until a bullish catalyst is delivered.

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To that end, the recent swing high around $54.67 will offer initial resistance should crude oil begin to climb. A break above this level would be an encouraging development from a technical perspective but another cautionary warning is offered by IG Client Sentiment Data which reveals retail traders are overwhelmingly net-long crude oil.

Since we typically take a contrarian view to IGCS, the data may suggest price is headed lower still. In the meantime, follow @PeterHanksFX on Twitter for updates.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX