Crude Oil Price Update – Dismal China PMI Data Should Lead to Multi-Year Lows

U.S. West Texas Intermediate crude oil futures plunged on Friday to levels not seen in over four years. The market also experienced its steepest weekly fall since 2008 as the spread of the coronavirus stokes fears of slowing global demand.

Initially, traders were worried about a drop in demand in China, but concerns have now shifted to global demand They have become increasingly worried because the virus has now spread beyond its epicenter in China to more than 40 other countries.

On Friday, April WTI crude oil settled at $44.76, down $2.33 or -4.95%.

Traders are bracing for an even further plunge on Monday after China released record low manufacturing numbers over the weekend.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Friday when sellers took out the December 24, 2018 main bottom at $45.92.

The main trend will change to up on a move through $54.66. This is highly unlikely, but with the market down seven days from its last main top on Monday, traders should start watching for a reversal bottom.

Short-Term Outlook

The bottoms at $45.92 and $43.55 have one thing in common:  OPEC. The bottom at $45.92 was formed shortly before OPEC began a second round of production cuts. The first bottom at $43.55 was formed when OPEC and its allies originally began trimming production in an effort to stabilize prices and reduce the global supply glut.

Traders are looking for sharply lower markets on Monday in response to China’s dismal manufacturing PMI report. The report is likely to cause a volatile reaction in the crude oil market.

The number is bearish, but it is also based on old data. China was virtually shut down when the PMI survey was taken. Now that factories in China are reopening, the data for March should jump higher. However, I don’t expect the number to rise enough to indicate expansion in the manufacturing sector of the economy.

Based on this information. Look for a sharply lower trade on the opening Monday, but don’t be surprised if prices move higher throughout the session.