Crude Oil Price Update – Closed on Weakside of Retracement Zone at $74.78 – $76.09

U.S. West Texas Intermediate crude oil futures plunged on Wednesday as investors worried about fuel demand as the global economy slows and COVID-19 cases grow in China. The bearish move this week represents the steepest percentage loss in the first two trading days of any year for over 3 decades, according to Reuters.

On Wednesday, March WTI crude oil futures settled at $73.10, down $4.02 or -5.21%. The United States Oil Fund ETF (USO) finished at $64.30, down $3.34 or -4.94%.

Bearish Factors Pile Up

Contributing to Wednesday’s weakness were a number of factors. The World Health Organization said data from China showed that while no new coronavirus variant has been found there, the country has under-represented how many people have died in its recent, rapidly spreading outbreak. This could show up in bearish domestic demand numbers.

In the U.S., demand concerns were also raised after a report showed U.S. manufacturing contracted further in December, dropping for a second straight month to 48.4 from 49.0 in November. According to the Institute for Supply Management (ISM), this was the weakest reading since May 2020.

Finally, the Federal Reserve released the minutes of its December monetary policy meeting on Wednesday, reinforcing expectations the central bank is likely to continue raising interest rates.

Higher rates could lift the U.S. Dollar, making commodities priced in the U.S. currency more expensive for foreign buyers of crude oil. This could also weigh on demand.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $70.56 will reaffirm the downtrend. A move through $81.62 will change the main trend to up.

The short-term range is $70.56 to $81.62. The market closed on the weak side of its retracement zone at $74.78 – $76.09, making it resistance.

The nearest support is the long-term retracement zone at $70.21 – $62.12.

Daily Swing Chart Technical Forecast

Trader reaction to the minor Fibonacci level at $74.78 is likely to determine the direction of the March WTI crude oil market early Thursday.

Bearish Scenario

A sustained move under $74.78 will indicate the presence of sellers. This could trigger the start of an acceleration to the downside with the next major target a potential support cluster at $70.56 to $70.21.

Bullish Scenario

A sustained move over $74.78 will signal the presence of buyers. This could lead to a quick test of the short-term 50% level at $76.09. Sellers could come in on the first test of this level, but overcoming it could trigger a surge into a minor pivot at $77.32.