There was a fair bit of hope for the crude oil bulls this year after a roaring start to 2019 saw WTI push above $66 per/barrel. But just as fast as it rose, price is now starting to plummet and the talk is now just how far it might fall.

There are a number of key catalysts that are weighing on price longer term. That’s despite a potential shortage in 2019 on the back of Russia’s pipeline contamination crisis and US sanctions against Iran and Venezuela.

The key drives appear to be rising shale production, slowing global growth and the worrying signs that the trade war is far from over. So despite a short-term concern over supply, longer term it looks that there is a glut on the way.

That will surely weigh on price going forward and could even cause OPEC to adjust their already reduce output for longer than they had hoped. The strong supply coming from US shale producers won’t be pleasing OPEC either.

So if the supply side is strong and demand is falling from places like China who are struggling of recent times, then the outlook does appear to be bleak.

Technical Outlook

All the attention now clearly falls onto the 50.00 level. If there is going to be a bounce that is where it is going to come from. At the same time, if price breaks through then there could be a fair bit more pain ahead for bulls.

Oil under $50.00 will likely slow down some US production and force OPEC to extend cuts. That said many producers claim to be profitable at levels far below (even half) that $50 mark so time will tell.

I will be watching how price reacts at the next test of the lows. If price makes a lower low and takes out $50, then there could be some more downside ahead. If price can’t test $50, there might be some buying interest there still and price could get a short-term bounce.

Bottom Line: For the time being the bias is clearly bearish.