Crude Oil Slides to 14-Week Low as China Virus Spreads

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Updated: Jan 27, 2020, 10:34 UTC

Crude oil continues to slide and prices have dropped close to the $52 level on Monday. As China struggles to contain the coronavirus, traders should be prepared for further losses in oil prices.

Oil prices were down sharply last week, and the downward trend has continued on Monday. Currently, WTI crude oil is trading at $52.39, down $1.95 or 3.29% on the day. March Brent crude oil is trading at $58.78, down $1.88 or 3.10%.

Will Crude Fall to $50?

U.S. crude prices remain under heavy downward pressure. Crude slipped 3.3% last week and is having a miserable January, with losses this month of 14.2 percent. The catalyst for the sharp drop in oil prices is the Chinese coronavirus, which has raised concerns that the Chinese economy will be damaged and demand for oil will be reduced. Commerzbank has warned that the situation could get worse, noting that investors “should be prepared for negative surprises when it comes to Chinese demand given that the government has now widened the coronavirus quarantine to ten cities in Hubei province with a total population of 30 million people. The impact of this is all the greater because the restrictions are being imposed during the busiest travel season for the Chinese.”

As the coronavirus continues to claim lives, investors are alarmed about the prospect of a mass epidemic. The virus has spread outside of China, with confirmed cases in the U.S., Canada, South Korea, Japan, and France. There are concerns that Chinese authorities have reacted slowly and are not revealing the full extent of the crisis. If China is unable to contain the outbreak, this could result in further turmoil in the markets.

Technical Analysis

Crude continues to lose ground and break below support levels. On the downside, the support level of 52.00 is under strong pressure. This is followed by a support line at 51.50. On the upside, there is resistance at 53.50, followed by 55.20.

About the Author

Kenny Fisherauthor

Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.