Crude Oil Dips Below $52 on EIA Surplus

Crude has lost more ground on Thursday. U.S. crude oil is trading at $52.35, down $0.75 or 1.43% on the day. Brent crude oil is trading at $58.63, down $0.93 or 1.53%.

Crude Dips After EIA Reports Surplus

The Energy Information Administration (EIA) report indicated a surplus of 3.5 million barrels last week, considerably higher than the forecast of 0.7 million. This was the highest level since early November and has put downward pressure on crude prices. U.S. crude has slipped below the $52 level on Thursday, its lowest level since October 10.

Will Crude Slide Continue?

It has been a dreadful January for crude, which has plunged 15% this month. Investors can be understood for feeling anxiety, but the current slide could prove to be a blip. We sat down with Michael Stark, an author with Exness Group, and asked him what he thought about the current market climate for crude. According to Stark, the long-term fundamentals of oil have not changed. The current market environment has resulted in over-selling of crude and there is the possibility that U.S crude will fall below the $50 level, which has not occurred since January of last year. Given the market volatility that we are experiencing, Stark said that traders may want to opt for the sidelines until this downward correction is over.

The catalyst for the sharp drop in oil prices has been the China coronavirus, as the outbreak has raised concerns that the Chinese economy will be damaged and demand for oil will be reduced. China is the world’s second-largest consumer of oil, so a further slowdown in the Chinese economy could translate into lower oil prices. At the same time, according to Stark, if oil prices continue to head lower, OPEC, and possibly Russia, could step in and lower production in order to stem the bleeding and raise oil prices.

Technical Analysis

The trend for crude remains down. On the downside, there is pressure on support at the 52.00 line, followed by support at 51.50. On the upside, 53.50 is an immediate resistance line. Above, we find resistance at 55.20.