- China’s coronavirus crisis weighs on WTI prices on speculation of lower demand.
- The Eurozone threatens to impose a cap on Russia, while the buoyant US Dollar continues to defend WTI.
- WTI Price Analysis: A daily close below $80.00 could pave the way for a retest of year-to-date lows.
The US crude oil benchmark, the Western Texas Intermediate (WTI), remained slightly negative due to weak demand surrounding the crude oil market. Factors such as his ongoing Covid-19 outbreak in China and reports of increased oil production coming out this week have kept WTI prices stable. At the time of writing, WTI has a trading volume of approximately 77.46 PB.
Investor sentiment is mixed, partly due to thinning liquidity as the week is shortened by the US Thanksgiving holiday. Additionally, the high number of registered Covid-19 cases in China will reduce demand for black gold, putting pressure on WTI prices.
Newswires reported a peak of about 31,987 cases on Thursday, up from 29,754 on Wednesday. Earlier in the week, Chinese officials unveiled measures to ease Covid-19, with the aim of easing restrictions. Still, officials in some cities are again imposing stricter measures and ordering lockdowns as they scramble to contain the virus.
Separately, oil prices fell on reports that the European Union is still in talks to impose a $65 to $70 per barrel price cap on Russian oil.
Additionally, the US dollar (USD) rose on Friday as short-covering speculation surrounded the market. The Dollar Index (DXY), a measure of the dollar’s value against a basket of six currencies, rose 0.36% to 106.000.
WTI Price Analysis: Technical Outlook
After reaching a weekly high of 82.35 PB on Tuesday, WTI extended its losses throughout the week. Of note, WTI’s break below $80.00 PB opens the door for further declines and Nov 21 lows if oil demand uncertainty increases for some underlying reason. It could test $75.30. In particular, the Relative Strength Index (RSI) continues to drop further, implying that sellers are gaining momentum.
Therefore, the path of least resistance for WTI is downward. WTI initial support is $77.00. A break below reveals the November 21st low of $75.30, which, once cleared, could send WTI prices down towards the year’s low of $74.30.