After a slight correction oil market resumed downward movement remaining under solid pressure of escalating trade war between USA and China.
Both benchmarks fell last week, with Brent losing more than 5% and WTI dropping about 2%.
Worsening relationship between two world’s largest economies substantially reduces the prospects of global economy growth and world’s energy demand. Last week International Energy Agency (IEA) has lowered forecast on the global growth outlook for fuel demand for the third time in the last four months.
According to opinion of numerous analysts USA and China will fail to strike a trade deal before the U.S. Presidential elections scheduled for 2020, therefore global oil demand will undergo further decline.
We can relate to local support factors for oil market Baker Hughes data reporting drawdown in oil rig count and mass media messages about suspension of production in China due to typhoon. In a sign of lower production in the United States, the weekly U.S. oil rig count, an early indicator of future output, fell for a sixth week in a row.
On the chart 58.75 level has been tested. Buyers failed to overcome resistance and the price resumed movement to the downside. Therefore locally on the chart a bearish trend is still on the cards with prospects of price decline towards the region of 55.00 level.
Resistance levels: 58.75, 62.30, 66.00;
Support levels: 55.55, 55.00, 54.00.
Main scenario: Stabilizing below 57.65 and decline towards 55.55.
Alternative scenario: Consolidation in the 57.65-58.75 range.
Negative fundamental sentiment still rules the market. Bearish signals prevail on the chart, therefore for intraday trading we give preference to short-positions for this asset seeking them in the vicinity of 58.75 level.