WTI down by another 4% to $35.80, its lowest since mid-June
The drop in oil yesterday was bad but things are looking worse from a technical perspective today, as we see price break below its 200-day MA (blue line) and now threatening a fall below its 8 September low @ $36.13.
Price is down another 4% after the sharp fall yesterday as the resurgence in virus cases across the globe is hampering the demand outlook, bringing back concerns regarding too much supply in the market as we look towards the year-end.
Tighter virus restrictions across Europe and particularly Germany and France only adds to the souring narrative, and the potential breakdown in the technical picture is exacerbating worries in the oil market over the past few days.
The greater-than-expected EIA inventory build yesterday, 4.3 mil barrels compared to estimates of 1.5 mil barrels, is also not helping with sentiment this week.
Looking at the technical picture, there is little in the way upon a break below $36 to the mid-June lows around $34.36-48 next. But beyond that, it is a slippery slope for oil with a potential fall towards $30 on the cards.
Looking ahead, the US election also presents added risks for the oil market next week. A Biden victory may spell a knee-jerk reaction lower considering his stance on wanting to ban fracking and amid virus jitters, it could exacerbate the downside potential.
That is something to expect in the near-term and unless OPEC+ is planning to step up its game going into its final meeting on 1 December, the risks are skewed to the downside for oil barring an upset where Trump steals the election again.
But if the latter does happen next week, I would expect virus jitters to continue to keep a lid on prices and fade any short-term reaction to the election result as such.
