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James Hyerczyk
WTI Brent Crude Oil

U.S. West Texas Intermediate crude oil futures are trading lower on Wednesday as a surge in the U.S. Dollar weighed on demand for the dollar-denominated asset. The safe-haven dollar rose as coronavirus cases jumped in the United States, Europe and Russia. Traders are worried that the latest increase in coronavirus infections could halt the global economic recovery and drive down fuel demand.

At 15:02 GMT, December WTI crude oil futures are trading $37.40, down $2.17 or -5.58%.

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Prices are also being pressured by a mixed inventories report from the Energy Information Administration. It showed U.S. stocks rose while gasoline and distillate inventories fell last week.

Crude inventories rose by 4.3 million barrels in the week to October 23 to 492.40 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.2 million-barrel rise.

U.S. gasoline stocks fell by 892,000 barrels in the week to 226.1 million barrels, the EIA said, compared with analysts’ expectations in a Reuter poll for a 961,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 4.5 million barrels in the week to 156.2 million barrels, versus expectations for a 2.1 million-barrel drop, the EIA data showed.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through the nearest main top at $41.90.

The minor trend is also down. A trade through $39.83 will change the minor trend to up. This will shift momentum to the upside.

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Short-Term Outlook

An extended trade through the last main bottom at $36.93 will reaffirm the downtrend. This could trigger a break into the June 12, 2020 main bottom at $35.72. This is followed by a major 50% level at $34.82.

The fundamentals are bearish. If the freefall continues into $35.72 to $34.82 then we’re likely to hear something from OPEC+ regarding the planned reduction in production output cuts on January 1.

If OPEC+ starts to feel too much heat then look for them to postpone the planned reduction. This won’t change the main trend to up, but it could trigger a closing price reversal bottom that could lead to a meaningful short-covering rally.

For a look at all of today’s economic events, check out our economic calendar.
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