U.S. Crude Falls Below $51 as Chinese Markets Slide

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Updated: Feb 3, 2020, 16:23 UTC

Oil prices have fallen on Monday as Chinese financial markets have dropped sharply, after reopening for the first time in a week.

Crude oil continues to head lower. Currently, U.S. crude oil is trading at $50.75, down $0.84 or 1.65% on the day. Brent crude oil is down sharply, trading at $55.22, down $1.40 or 2.34%.

Chinese Market Slide Weighs on Oil

While China coronavirus was causing jitters on global financial markets, Chinese markets were closed last week for the Chinese New Year. Investors were braced for a downward correction on Monday, when the markets reopened for business. Sure enough, the news was dismal. Chinese stock markets have dropped 10% on Monday, and the Chinese yuan has fallen over 1 percent. The government has tried to control the turmoil, injecting some $174 billion into the financial markets and banning short-selling. Still, it’s doubtful that these measures will steady the markets, and the downward direction could well continue this week.

Meanwhile, the outbreak is causing severe disruption to the Chinese economy. Chinese officials have ordered two-thirds of Chinese businesses to remain closed until at least next week. China is the world’s second-largest consumer of oil, and the turmoil in China continues to weigh on oil prices. U.S. crude touched a low on Monday of 50.59, its lowest level since August. January was a disastrous month, as U.S. crude fell 15.7 percent, its worst monthly performance since May. With this backdrop, we could see U.S. crude test the key $50.00 as early as this week. This level hasn’t been breached since January 2019.

Technical Analysis

The trend for crude remains down and support levels continue to fall as crude falls to lower levels. On the downside, there is pressure on support at the key 50.00 level. Below, there is support at 49.00. On the upside, there is resistance at 51.50, followed by resistance at the round number of 52.00.

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.