Crude Prices Drop for Second Straight Day

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Published: Oct 29, 2019, 15:25 UTC

Oil prices have dipped on Tuesday and are down over 3% this week. Will the downward trend continue? We could see stronger movement on Wednesday, with the release of U.S. GDP and an expected rate cut from the Federal Reserve.

Crude oil has posted losses in Tuesday trade. In the North American session, U.S. West Texas Intermediate crude oil futures are trading at $54.87, down $0.83 or 1.5% on the day. Brent crude oil futures are trading at $61.58, down $0.36 or 1.0%.

Crude Under Pressure, Drops Below $55

After posting strong gains of 5.5% last week, oil prices have reversed directions, and have declined 3.1% so far this week. These swings could continue, as we are seeing a renewed focus on supply and demand fundamentals. This has been evident with the strong reaction from crude to U.S. inventories reports, for examples. A string of surpluses in recent weeks put significant downward pressure on oil prices; conversely, the unexpected decline in inventories last week sent oil prices higher. The Energy Information Administration will publish its weekly report on Wednesday, with the estimate standing at 0.5 million barrels. An unexpected reading could cause some stronger movement in crude prices.

With signs of an oversupply of crude on the global markets, OPEC could play a key role with regard to oil prices. The current OPEC agreement runs out in December, and there will likely be a push to continue to reduce output and boost crude prices. Historically, however, OPEC members have had difficulty reaching agreements on lower output quotas, with some countries reluctant to reduce revenue from oil exports.

Crude Technical Analysis

I continue to keep an eye on the 50-EMA, which is currently at 55.24. Crude prices broke above the EMA line last week, and this line has broken again in the North American session. This could point to some fluidity in oil prices until a tend can be established. On the upside, there is resistance at the 58.00 level. On the downside, we find support at 53.00. This line was tested in mid-October, but has weathered the downward pressure and has some breathing room.

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.