Crude Oil Forecast – Crude Retreats After Touching 4-Week High
Crude oil is slightly lower on Friday. Currently, U.S. crude oil is trading at $53.15, down $0.54 or 1.01% on the day. Brent crude oil is trading at $58.28, down $0.76 or 1.32% on the day. In economic news, the U.S. Department of Energy crude inventories report indicated a negligible gain of 0.4 million barrels, well off the forecast of 3.3 million barrels.
China, OPEC Under Scrutiny
There are two key factors which are having a major effect on oil prices. The first is the coronavirus outbreak, which has caused havoc in the Chinese economy and also poses a risk to the global economy. The virus continues to weigh heavily on investor sentiment. Given that China is the world’s second-largest consumer of oil, the turmoil in China has weighed heavily on oil prices. Analysts are projecting that China’s GDP will fall sharply in the first quarter of 2020, and this will translate into less demand for crude, which means downward pressure on prices.
Your capital is at risk
The second factor is whether OPEC will manage to push through a production cut. Saudi Arabia, the kingpin of OPEC, has led the charge for a cut in order to lift sagging oil prices. However, OPEC needs the support of Russia, a major oil producer. Russia has not yet responded to OPEC’s proposal, but analysts expect the matter to be resolved at a meeting on March 6 of OPEC and non-OPEC oil ministers. The outcome of the meeting could well have a significant effect on the movement of crude – if the Russians agree and the cut is implemented, prices would stabilize or even increase. However, if Moscow balks and the proposal falls by the wayside, we can expect crude prices to continue falling.
Technical Analysis
The trend for WTI/USD remains upward, although U.S. crude has retreated on Friday. The round number of 53.00 is under pressure in support and was tested in the Asian session. Below, there is support at 50.90, which is protecting the symbolic 50.00 level. This is followed by support at 49.30.
On the upside, there is resistance at 54.50, with the 50-day EMA situated at 54.84. A breach of this line would aim for the 200-day EMA, which is located at 56.67.