- WTI has bounced up slightly from 13-month lows reached earlier Tuesday.
- Death cross on the monthly chart suggests scope for a corrective rally.
- OPEC is considering to deepen oil output cuts.
West Texas Intermediate (WTI) oil is currently trading at $50.30, having dropped to a 13-month low of $49.68 two hours ago. The black gold is witnessing a corrective bounce at press time.
Bear market
WTI is officially in a bear market, having dropped by more than 20% since topping out at $65.62 on Jan. 8. A major portion of the sell-off could be associated with continued fears about the impact of the coronavirus epidemic on the global economy.
The number of confirmed coronavirus cases in China has reached 17,205 – this is double that of the SARS outbreak in 2002-2003.
China oil demand is said to have plunged 20% on virus lockdown, according to Bloomberg news and the demand for jet fuel, gasoline, and diesel is likely to remain suppressed in the coming weeks, according to analysts.
Death cross a bear trap?
WTI’s 50-month average has crossed below its 200-month average, confirming a death cross, a bearish indicator.
Moving averages, however, are based on historical data and tend to lag price. The death cross, therefore, is a big-time lagging indicator and often traps the sellers on the wrong side of the market – that is, it tends to occur following a big price slide, with prices rallying soon after. Moreover, the market is oversold by the time the crossover happens.
So, the minor bounce seen at press time could turn out to be a notable corrective rally – more so, as the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are reportedly planning to deepen the oil output cut agreement by an additional 500,000 barrels per day to stem the fall in oil prices.
Technical levels
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