Since tensions in the Middle East eased, crude oil price has been under heavy selling pressure.
WTI crude oil plunged by 3.74% in yesterday’s trading. It traded steadily lower after opening at $58.26. By the end of the New York session, the commodity had settled at $56.03.
It also did not help that data from the American Petroleum Institute (API) showed that there is a surplus in inventory. For the week ending on January 17, crude oil inventories held in commercial storage was at 1.6 million barrels. That was more than the 1.1 million surplus reported for the week prior.
Later today, the Energy Information Administration (EIA) will release its own version of the report. Due at 4:00 pm GMT, it is expected to show a shortage of 100,000 barrels. A lower number could support crude oil price in today’s trading because it would suggest the US demand for oil may soon pick up. On the other hand, a surplus could only exacerbate the slide on crude oil price even further.
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On the weekly chart, we can see that the recent price action on WTI crude oil CFD has pushed the commodity below a critical support level. It is now trading below a major trend line which becomes apparent when you connect the lows of December 23, 2018, August 4, 2019, October 6, 2019, and November 24, 2019. Crude oil price now looks like it is about to test support at the 200 SMA around $55.40. If this week’s candle closes below this price, it could mean that crude oil may soon fall to support around $51.50 where the commodity hit lows on June 6, 2019, August 4 2019, and September 29, 2019.
On the other hand, if support at the 200 SMA holds, we could see crude oil price retest the broken trend line for resistance. It may pull back to $57.50.