Crude Oil Prices Down on Asian Demand Concerns Amid Viral Resurgence
CRUDE OIL PRICE OUTLOOK:
- Crude oil prices fell slightly during Monday’s APAC session amid rising viral concerns
- Japan declared new state of emergency in Tokyo, Osaka and two other areas. India’s daily Covid-19 infections hit a record high
- Wednesday’s OPEC+ meeting is under the spotlight as traders await clues about the supply outlook
WTI traded slightly lower during the APAC mid-day session as viral resurgence in Japan and India set a sour tone for oil trading. Japan declared a third state of emergency in Tokyo, Osaka and two other prefectures to curb a surge in coronavirus cases. These areas account for ¼ of Japan’s population and 1/3 of its economic output. The measures started on Sunday and will be in place until at least May 11th, casting a shadow on the upcoming Tokyo Olympics.
Japan is the world’s fourth largest oil importing country, consuming around 7% of global oil exports during 2019. Therefore, reduced domestic travel and a halt of non-essential businesses could bring a considerable impact to energy consumption during the restricted period.
India reported a record increase in its daily Covid-19 infections, with 349,691 cases added over the past 24 hours. India is the world’s third largest oil importer and accounted for around 10% of global imports in 2019. A rapid surge in coronavirus infections may lead to tightened travel restrictions and could bring the country closer to a nation-wide lockdown.
Meanwhile, oil traders will keep an eye on Wednesday’s OPEC and non-OPEC ministerial meeting for clues about the supply outlook. The oil cartel and its allies have decided to add 2.25 million bpd from May to July at a meeting held on April 1st. Since then, the energy demand outlook was brightened by robust economic data from the US and China. Looking ahead, deteriorating viral situations in parts of Asia may hinder OPEC+ from considering raising output further.
Iranian oil production could be another wildcard in the oil market. Recently, the country attempted to resume talks on the 2015 nuclear deal in order to free itself from economic sanctions imposed by the US. Although the ongoing negotiations have yet to yield any fruit, the potential return of Iranian supply in the future posts a threat to the fragile supply and demand balance.
Cumulative confirmed Covid-19 Cases – India and Japan
Technically, WTI formed a “Double Top” pattern before entering into a consolidative phase on the 4-hour chart. An immediate resistance level can be found at US$ 63.83 - the 61.8% Fibonacci retracement. An immediate support level can be found at around US$ 61.15 – the 100-period SMA line.
The MACD indicator has formed a bullish crossover beneath the neutral midpoint, suggesting that bullish momentum may be accumulating.
WTI Crude Oil Price – 4-Hour Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.