- The price of oil comes under pressure as risk markets collapse.
- US Pres Trump has killed the US stimulus negotiations.
- Technically, WTI is headed to a key support level.
The price of oil has, so far, defied gravity and the prospects of a prolonged economic downfall pertaining to the spread of the coronavirus and subsequent economic lockdowns.
Technically, the price has also recovered back into bullish territory and is testing the last resistance area of the current market structure.
At the time of writing, WTI is trading at $40.07 between a low of $39.13 and a high of $40.81.
However, the US President Donald Trump has just thrown a spanner in the works for risk trades by announcing that he has instructed his representatives to stop negotiating on the stimulus bill, ”until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
The news has sent the stock markets in a tailspin and has weighed heavily on risk, denting oil’s progress.
Meanwhile, analysts at TD Securities explained that as we approach winter in the Western hemisphere, energy markets must take part in a balancing act.
The analysts made a series of key points as follows:
- ”An ongoing second wave of infections continues to deter capital from flowing into the complex, while at the same time, the world is making progress on vaccines and treatments that could dramatically alter demand expectations as it could unleash pent-up demand on a massive scale.”
- ”At the same time, the ongoing US election presents several risks for energy traders, particularly with respect to the Iran Nuclear Deal and US energy policy — both of which have the potential to shock supply expectations. ”
- ”We expect that the balance of risks will remain tilted towards the right-side tail as a continued economic normalization and COVID-19 management could create a set-up for an upside surprise. At the same time, the weakened shale production profile and the implied OPEC put mitigate downside risks associated with a slower demand recovery.”
WTI technical analysis
The gap is being filled and the price is running towards the support area.
If the support gives out, then there is a high probability that the downside bias is still in play.