Crude Oil Forecast – Crude Slides as Coronavirus Spreads

The coronavirus continues to spread, and this weighed heavily on oil prices on Monday, as investors remained concerned that the demand for crude is falling.
Kenny Fisher
Crude Oil daily chart, September 23, 2019

In the European session, U.S. crude oil is trading at $51.16, down $2.02 or 3.83% on the day. Brent crude oil is trading at $56.12, down $2.29 or 3.95% on the day.

Markets Jittery as Coronavirus Reaches Italy

The China coronavirus is weighing on the markets, as the outbreak continues to spread. With growing fears that the virus is becoming a pandemic, investors are nervous that crude demand will continue to fall and drag prices lower.

Earlier on Monday, Italy reported that 200 confirmed cases, the largest number of cases outside of Asia. Italy’s health officials have imposed severe restrictions, which include limiting transport and the quarantine of individuals in affected areas. There is extreme concern that that virus could quickly spread throughout western Europe, as the Schengen Area, which covers 26 countries, allows for borderless travel. The European Union has said that it will not impose travel bans, but that could change if other European countries report coronavirus cases.

World Health Organization Director-General Tedros Adhanom Ghebreyesus said on Saturday that there was still a chance to contain the virus beyond China, “but the window of opportunity is narrowing.” Tedrus added that the increase in cases in Italy, South Korea and Iran “is also a matter of concern and how the virus is now spreading to other parts of the world.”

Technical Analysis

WTI/USD is down sharply on Monday, putting strong pressure on the 50.90 line. This line could be tested later in the Monday session. Below, there is support at the symbolic 50.00 level, followed by support at 49.30.

On the upside, there is resistance at 52.50, followed by resistance at 54.00. Above, the 50-day EMA is situated at 54.71.

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