Crude oil price decreased by more than 2%, updating months-long trading lows due to the coronavirus spread reports. Chinese authorities continue to implement preventive measures to stop further spread of the virus and block the main pest-spots. Investors fear that this situation may have a negative impact on the dynamics of oil demand.
Additional pressure on the market is exerted by stock exchanges. The main indexes are traded in the red zone, reflecting the flight of capital away from risky assets.
The Minister of Energy of Saudi Arabia tried to calm down the market, he stated that OPEC+ could take measures to stabilize the situation. He also noted that now the market is moving under the influence of psychological factors related to the fear of the further spread of coronavirus, despite the rather limited influence of this event on the real level of energy demand.
Despite a strong decline in quotes at the opening, locally on the chart there are signals in favor of the development of an upward correctional movement with a target at the level of 54.00, where trading ended on Friday. But with such a strong downtrend, longs are still very risky.
· Resistance levels: 54.00, 55.05, 55.50;
· Support levels: 52.65, 52.00, 51.00.
The main scenario - a correction towards the level of 54.00
An alternative scenario - a breakdown of intraday support at the level of 52.65 and a decline towards 52.00.
The fundamental outlook is moderately negative. The chart is dominated by a strong bearish trend, so within the daily framework we would prefer shorts. Entry points should be sought near the level of 54.00.