Oil At 13 Month Low More Downside To Come

Aggressive selling continues in oil, as fears deepen that the rapid spread of coronavirus will lead to a global pandemic and potentially to a global recession.

Coronavirus

US Crude oil is trending lower for it fourth straight session with few signs that the bulls will take back control anytime soon. The global demand picture is weakening by the day as coronavirus spreads across the globe.

Whilst traders had been pricing in reduced demand from China since the outbreak hit headlines in mid January, comments from US Federal health authorities have added to anxieties. The US CDC warning over the expected spread of coronavirus in the US has meant that reduced demand from the largest oil consumer in the world is now also starting to be priced in.

API data
API reported a smaller than forecast inventory build of 1.3 million barrels, versus expectations of a 3-million-barrel increase. Today’s EIA weekly inventories report is expected to show a build of 2.3 million barrels.

As coronavirus panic takes over, traders are become increasing more concerned with how global oil demand will be hit and less interested in weekly inventory data. There seems to be little interest in the steep decline in Libyan output or whether the OPEC+ group decides to trim production again.

OPEC
It is doubtful that OPEC+ will announce further output cuts right now, without having further information on loss of demand. There is a good chance that they will wait for fresh economic data to assess the impact of coronavirus first. Even if OPEC did announce additional production cuts, we are more likely to see some short covering now rather than a change of trend.

Levels to watch
Crude is down 1.7% today and almost 8% so far this week. Crude trades at a 13-month low and below its 50, 100 and 200 moving average, with a bearish outlook.
Immediate support can be seen at $49 (today’s low), a break through here could open the door to $48.30 (8th Jan ‘19 low) prior to $46.70 (4th Jan’19 low).
Resistance csan be seen at $50.42 (today’s high). This could lead towards resistance at $52. (yesterday’s high), a breakthrough there could negate the current bearish trend.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.