Oil Price Forecast – Oil Remains on Track for Higher Prices

Last Friday crude oil began a potential breakout of a daily double bottom reversal pattern as it moved above the top of the pattern at $52.16 and closed above it on a weekly basis. Also, the week ended above the prior week’s high. Nevertheless, the close was only 0.01 above the breakout level. To be more reliable the breakout should be decisive and so far, it is not.

At this point in the day, crude oil is little changed at $52.17, down only 0.01 or 0.01%.

Global Growth Concerns Addressed

Looking to offset the potential economic slowdown from the coronavirus outbreak, China, Hong Kong and Singapore each announced new fiscal stimulus measures. Meanwhile, China’s central bank decided to loosen the number of non-performing loans that banks can accrue on their books and cut interest rates for borrowing.

Nonetheless, oil demand forecasts are down with the International Energy Agency last week lowering its demand forecast for this quarter. That’s the first time in over 10 years that the agency is forecasting lower demand.

Bullish Evidence

Regardless of the lack a decisive breakout thus far and lower oil demand forecasts, there are additional bullish technical indications that support the likelihood that the recent low of $49.30 from two weeks ago holds as support and that oil moves higher.

Certainly, a minimum retracement of the recent decline to the 38.2% Fibonacci retracement of $55.55 seems likely. After that, the next more significant resistance zone is around $57.40 to $57.48.

On a weekly basis oil shows a higher high and higher low. It’s been seven weeks since that has occurred. Also, oil is coming off a potential significant support zone, identified as the lower line of a broadening formation.

Moreover, there is a bullish divergence with the 14-day Relative Strength Index (RSI) momentum oscillator, where the oscillator is trending up off the lows and oil has not quite confirmed strength just yet.

Intraday Chart Bullish

Finally, on the 4-hour intraday chart, the short term 21-period exponential moving average (ema) is starting to cross above the longer 55-period ema, reflecting a change in trend to bull from bear. The 21-period ema has been below the 55-period line early-January.