Crude Oil Price Update – Testing Seven-Week Low on China Demand Concerns

U.S. West Texas Intermediate crude oil futures are down sharply late Friday due to concerns over weakening demand in China and worries that rising U.S. interest rates will drive the economy into recession.

At 19:04 GMT, January WTI crude oil is trading $79.28, down $2.12 or -2.60%. The United States Oil Fund ETF (USO) is at $68.50, down $1.64 or -2.34%.

Reuters is reporting that China is looking to slow crude imports from some exporters as it battles a rise in COVID-19 cases. Meanwhile, hopes for less aggressive rate hikes by the Federal Reserve have fizzled, dampened by remarks from a few hawkish Federal Reserve officials this week.

Not only will rising rates drive up the U.S. Dollar, thus denting foreign demand for dollar-denominated crude oil, but they could also lead the country into recession, which would also weigh on demand.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through $80.49 reaffirmed the downtrend. A move through $92.53 will change the main trend to up.

The minor trend is also down. A trade through $89.20 will change the minor trend to up.

The main range is $60.23 to $108.63. The main retracement zone is $78.72 to $72.31. This is potential support. It stopped the selling earlier in the session at $77.59.

On the upside, resistance is a short-term Fibonacci level at $81.67, followed by a pair of 50% levels at $83.75 and $84.43.

Daily Swing Chart Technical Forecast

Trader reaction to the major Fibonacci level at $78.72 is likely to determine the direction of the January WTI crude oil futures contract into the close on Friday.

Bullish Scenario

A sustained move over $78.72 will indicate the presence of buyers. If this creates enough upside momentum then look for a possible surge into $81.67.

Bearish Scenario

A sustained move under $78.72 will signal the presence of sellers. If this generates enough downside momentum then look for a possible acceleration to the downside with the main bottom at $74.96 the next likely target.