- Summary:
- Crude oil price has retreated today but a technical analysis shows that the price will continue rising. The price rose after a covid vaccine was revealed
Crude oil price spiked in the American session as traders reacted to the latest Covid-19 vaccine news. Brent crude reached a high of $43.25 while West Texas Intermediate (WTI) rose to $40.60. The prices have erased some of these gains in overnight trading and are down by more than 1%.
Vaccine and crude oil prices
This year, the Covid-19 pandemic has had major impacts on the price of crude oil. In total, Brent and WTI have dropped by more than 30% mostly because of low demand. This weak demand has happened because more people are working from home and the fact that international travel has slowed to a halt.
At the same time, the world has not seen a dramatic decline in supply. While OPEC, its allies and other producers have slashed production, the current output is still relatively high.
Therefore, investors believe that only a significant increase in global demand will help push crude oil price higher. Signs of this demand came out yesterday when Pfizer revealed that its vaccine was 90% effective. That meant that the vaccine shots could start being administered in most countries in the next few months.
At the same time, the Federal Drug Administration (FDA) announced that it would allow an antibody manufactured by Eli Lilly to be used in treating the disease. These two events, and the fact that the US election was peaceful, helped push crude oil prices higher.
Later today, the Energy Information Administration (EIA) will release the short-term energy outlook. This is an important document that contains a prediction about demand and supply in the coming months.
Today, crude oil price is falling partly because of news that Brazil had halted a Covid vaccine known as Sinovac after a serious event.
Brent crude oil price technical outlook
On the four-hour chart, we see that Brent crude oil price has risen by more than 21% this month. The price reached a high of $43.25 yesterday and then pulled back to the current level of $42. Yesterday’s high was an important resistance because it was the highest point in October.
The price remains above the 25-day and 15-day exponential moving averages, which is a sign that bulls have prevailed. It is also above the 61.8% Fibonacci retracement level.
Therefore, I suspect that bulls will prevail once again in this pullback and that the price will continue rallying as they target the next 78.6% retracement at $44.15.
On the flip side, a move below the 50% retracement at $41 will mean that there are more bears in the market.
Brent technical chart
