WTI Crude Oil Slips Lower, to $ 47 – Upward Trendline Supports

Posted Tuesday, December 22, 2020 by
Arslan Butt • 3 min read

During Tuesday’s Asian trading session, the WTI Crude Oil prices failed to stop their losing streak of the previous day, seesawing in a choppy range between $47.50 and 48.00, as the rapid spread of a new strain of the novel coronavirus in the UK urged several countries to close their borders to British travelers and freight, which in turn raised the worries over the fuel demand and contributed to the losses in crude oil. The reason for the heavy losses in the oil prices could also be attributed to the downbeat market mood, which tends to undermine the higher-yielding crude oil prices.

However, the market trading sentiment was also under pressure due to the Brexit uncertainty and the fears sparked by the new coronavirus (COVID-19) variant.

Meanwhile, the broad-based US dollar succeeded in maintaining its bullish bias of the previous day, continuing to flash green, which was also seen as one of the key factors that kept the crude oil prices under pressure, as the price of oil is inversely related to the price of the US dollar.

At the moment, crude oil is trading at $ 47.66, and consolidating in the range between 47.59 and 47.97. The market trading sentiment failed to stop its bearish moves of the previous day, remaining depressed during the early Asian session, as the new COVID-19 strain that is spreading rampantly in the UK, pushed countries to impose fresh lockdowns and limited travel, which, of course, triggered fresh fuel demand concerns. As per the latest report, the new strain of the COVID-19 virus has already been reported in Italian patients, while New York Governor Andrew Cuomo believes that it is already circulating in New York, which could lead to additional restrictions on movement. It should also be noted that some Asian countries, like India, Pakistan, Russia, Jordan and Hong Kong, have also suspended travel from the UK, which has raised further worries over the fuel demand. These steps followed after the British government warned that this mutation of the COVID-19 virus seemed to spread much faster than previous ones.

When considering the current condition of the oil market, the Russian Deputy Prime Minister and former Energy Minister, Alexander Novak, said: “We are meeting monthly because we believe that the market has still not recovered and it is still extremely volatile. We need to adopt a hands-on approach and be able to react faster.”

Apart from this, the prevalent fears of a no-deal Brexit and the long-lasting Sino-US tussle also weighed on the risk sentiment, which eventually undermined the higher-yielding crude oil prices. It is worth recalling that US President Donald Trump has decided to add dozens of Chinese companies, including the country’s top chipmaker, SMIC, to the commerce department’s black list.

In turn, the broad-based US dollar succeeded in maintaining its gaining streak of the previous day, taking some further bids during the Asian session, as investors still prefer the safe-haven assets in the wake of a risk-off market sentiment. However, the gains in the US dollar seem rather unaffected by the progress on the US stimulus bill, which tends to undermine the US currency. As already mentioned, the progress on the stimulus package was confirmed after US House Speaker Nancy Pelosi said: “Congressional Democrats have reached an agreement with Republicans and the White House on an emergency coronavirus relief and omnibus package that delivers urgently needed funds to save the lives and livelihoods of the American people.” Thereby, the gains in the greenback kept the crude oil prices down, as the price of oil is inversely related to the price of the US dollar. Meanwhile, the US Dollar Index, which tracks the greenback against a bucket of other currencies, has risen to 90.145.

On the bullish side, the members of the US Congress are currently voting on the $ 900 billion aid package and the $ 1.4 trillion omnibus government spending bill, with most policymakers favoring a smooth passage. However, the intensifying hopes of an aid package are helping to limit deeper losses in terms of the market sentiment. Furthermore, the losses were also capped by the comments by the European Medicines Agency, suggesting that there’s no evidence that the recently developed vaccines will not work with the new coronavirus variant. Besides this, UK PM Boris Johnson also showed his willingness to push for an 11th-hour Brexit effort.

Daily Support and Resistance
S1 46.68
S2 47.83
S3 48.54
Pivot Point 48.99
R1 49.7
R2 50.14
R3 51.29

US Oil is trading at the 46.75 level, and gaining support at 46.25, extended by an upward trendline. On the four-hourly timeframe, US Oil is facing a hard time in terms of a continuation of its bullish trend; therefore, we can expect a sharp sell-off upon a bearish breakout of 46.30 support, which could lead it towards the next support levels of 45.80 and 45.11. Conversely, the resistance remains at 47.95. Good luck!

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