Crude Oil Price Update – Weakens Under $38.83, Strengthens Over $39.42

U.S. West Texas Intermediate crude oil futures are down nearly 3% on Monday, extending last week’s losses as growing cases of COVID-19 in the United States and Europe raised concerns about crude demand, while the prospect of increased supply also hurt sentiment.

At 10:30 GMT, December WTI crude oil futures are trading $38.98, down $0.87 or -2.18%.

The bearish factors currently outweigh any hard to find bullish news. On the demand side, they include a surge in coronavirus cases in the United States and Europe. An the supply side, Libya’s National Oil Corp. said production would reach 1 million barrels per day (bpd) in four weeks.

OPEC+ is the wildcard. It recently agreed to continue to reduce production cuts as of January 1. However, if prices continue to weaken as demand falls, OPEC and its allies may be encouraged to keep the output cuts at current levels, or perhaps ramp them up if needed.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed early Monday when sellers took out Friday’s low. A trade through the nearest main bottom at $36.93 will reaffirm the downtrend. A move through $41.90 will change the main trend to up.

The minor range is $36.93 to $41.90. The market is currently straddling its retracement zone at $39.42 to $38.83. This area is controlling the short-term direction of the market.

The short-term range is $44.33 to $36.93. Its retracement zone at $40.63 to $41.50 is resistance.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December WTI Crude oil futures contract on Monday is likely to be determined by trader reaction to the 50% level at $39.42 and the Fibonacci level at $38.83.

Bullish Scenario

A sustained move over $39.42 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into $40.16, followed by the main 50% level at $40.63.

Bearish Scenario

A sustained move under $38.83 will open the market up to a possible acceleration to the downside with the next major target the October 2 main bottom at $36.93.