Crude oil price began the new week on its back foot; extending losses from the previous week. On Friday, the benchmark for US oil- WTI futures – dropped below the psychologically crucial level of $80 for the first time since 3rd October. It is hovering around this zone for the second session in a row; trading at $80.14 as at 07:45 a.m GMT.
Similarly, Brent oil is in the red for the fourth consecutive session as China continues to grapple with COVID-19. As at the time of writing, it was trading at $87.44; down by 0.43%.
What’s driving the crude oil market?
The COVID-19 pandemic in China remains one of the main bearish drivers of crude oil price. New infections remain close to April’s peaks; an aspect that has heightened concerns over crude oil demand in the second-largest economy.
Over the weekend, three people died of COVID-19; the first deaths since May when Shanghai city went into lockdown. Beijing city tightened its restrictive measures late last week as daily infections in the region surged to several hundreds.
Indeed, all of the 31 provinces in mainland China have been affected by the new coronavirus wave. Subsequently, authorities in these regions have enacted various levels of restrictions. Notably, the country is the leading importer of crude oil and the second-largest consumer of the product after the US.
The rebounding of the US dollar has also contributed to the easing of crude oil price. After hitting its three-month low in the previous week, the dollar index has extended its gains into the new week to a one-week high at $107.81. As is the case with other dollar-priced assets, crude oil price moves inversely to the value of the US dollar.
Brent crude oil price prediction
As shown on its daily chart, Brent oil remained in the oversold territory with an RSI of 37. Besides, it is trading below the 25 and 50-day exponential moving averages. A look at both the fundamentals and technicals indicates that crude oil price may remain under pressure in the ensuing sessions.
In particular, the range between the support level at 83.21 and the resistance zone of 91.06 will be worth watching in the short term. With further losses, the bulls will be striving to defend the critical support at 80. For this bearish thesis to be invalidated, there will need to be enough buyers to push crude oil price past the resistance level at 94.59.