Worries about Global Demand Push Crude Oil Lower For Two Consecutive Sessions

Andreas Thalassinos
Andreas Thalassinos

06.3.2024

The price of Crude Oil has registered a second consecutive decline, currently standing at 78.442 US dollars per barrel.  The downward retracement is attributed to various factors, including concerns regarding the outlook for Chinese demand, an anticipated increase in US Crude Oil inventories for the previous week, due to be announced later today, and delays in physical oil deliveries due to geopolitical tensions.  Traders will closely monitor the market today due to significant economic data releases and their potential impact on Crude Oil.

Overview

The price of Crude Oil has registered a second consecutive decline, currently standing at 78.442 US dollars per barrel.  The downward retracement is attributed to various factors, including concerns regarding the outlook for Chinese demand, an anticipated increase in US Crude Oil inventories for the previous week, due to be announced later today, and delays in physical oil deliveries due to geopolitical tensions.  Traders will closely monitor the market today due to significant economic data releases and their potential impact on Crude Oil.

Upcoming Economic Events

Wednesday 01:15 pm (GMT): ADP Non-Farm Employment Change
Wednesday 03:00 pm (GMT): JOLTS Job Openings
Wednesday 03:30 pm (GMT): Crude Oil Inventories
Thursday 01:30 pm (GMT): Unemployment Claims
Friday 01:30 pm (GMT): Non-Farm Payrolls

Technical Analysis

Since its dip to 67.708 US dollars per barrel on December 13, Crude Oil has been on an upward trend as defined by higher peaks and higher troughs.  The decline in price drew the attention of bullish investors, who entered the market with long positions, resulting in a surge in the commodity's price to 80.970 US dollars per barrel, the highest it has been this year.  Meanwhile, the formation of an Evening Star candlestick reversal pattern alerted treaders for an impending correction, as traced by two consecutive bearish sessions.  The weakness of the bulls to pull the price any higher, at least at the moment, is also supported by the negative divergence between the price and the Momentum oscillator.  However, the commodity remains in an upward trajectory, as confirmed by the 50-period Moving Average and the Momentum oscillator.  Prices remain above the Moving Average line and the Momentum oscillator hovers above its baseline.

Potential Downside Targets

In case Crude Oil remains in the downward corrective phase, the following potential downside targets may be considered by traders:

76.00: The initial target represents a retest of the recent low price established on February 26, the high marked on December 12, and the 38.2% Fibonacci retracement drawn from the trough at 67.708 up to 80.970.
74.323: The 50.00% retracement level of the recent upward movement from 67.708 to 80.970 can be used to estimate the next potential target.
72.762: Next, 72.762 is calculated by using the 61.8% Fibonacci retracement.
71.360: Finally, the fourth potential price target is 71.360, corresponding to the low mark on February 5.

Potential Upside Targets

On the other hand, if the bulls gain control of the market, the following price targets can be estimated:

80.970: One possible resistance level is 80.970, corresponding to the year's high.
84.139: An additional price target can be found at the 261.8% Fibonacci extension of the previous swing that extends from the high at 79.109 to the low at 76.00.

Conlusion and Considerations

In light of the current price action traced in the crude oil market, it is apparent that the market's trajectory is upward.  However, traders need to acknowledge the possibility of a downward correction after the formation of an Evening Star pattern on the price chart.  Several factors, including concerns about a slowdown in global demand, China's business activity growth showing signs of decelerating, geopolitical tensions, and the potential strengthening of the US dollar, formed the basis of this analysis.  Given these factors, it is imperative to remain alert and proactive in monitoring the market trends and take appropriate measures to mitigate potential risks.  
 

share_this_article

Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.