Crude Oil Price Update – With May Futures Off the Board, Prices Could Consolidate

U.S. West Texas Intermediate crude oil futures finished sharply lower on Tuesday, but well off its session lows as the massive selling gripping the oil market is now spreading to more futures contracts, worrying investors about the deep economic damage being caused by the coronavirus shutdowns.

The expiring May WTI futures contract pared losses to trade in positive territory on Tuesday, one day after plunging below zero for the first time in history. The contract for June delivery, which is the more actively traded contract and therefore a better indication of how Wall Street views the price of oil, slipped more that 60% earlier in the session.

At 20:41 GMT, June WTI crude oil futures are trading $13.16, down $7.27 or -35.58%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through Tuesday’s low at $6.50 will signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at $33.15.

The new short-term range is $33.15 to $6.50. Its retracement zone at $19.83 to $22.97 is a potential upside target and resistance zone. Since the main trend is down, sellers are likely to come in on a test of this zone.

The main range is $48.92 to $6.50. Its retracement zone at $27.71 to $32.72 is the next major retracement zone.

Short-Term Outlook

The fundamentals are bearish so don’t expect the trend to change to up. However, now that the May contract is off the board, there is less pressure to continue to drive prices sharply lower. Traders may decide to consolidate here or at higher price levels before beginning another round of selling pressure.

The OPEC+ production cuts begin on May 1. This could encourage some short-covering or profit-taking although the cuts may not have an impact on supply for several months. Although the focus has been on supply this week, the real issue is demand, and that problem can’t be addressed until the world gains control of the spread of the coronavirus.