Gold 1795,09
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EURUSD 1,1281
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DJIA 35014,50
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OIL.WTI 71,145
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DAX 15113,95
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WTI crude futures lost almost 13% on Friday. The WHO’s news that a new strain of coronavirus with a large number of mutations has been found in South Africa “of concern” has crashed markets and triggered a wave of risk aversion. How low can oil go now?
OIL.WTI
WTI ended Friday’s trading session near $86 a barrel, having fallen from $78 for the day. Technically, the double-top reversal pattern was thus more than worked out.
At the same time, the floating support line formed by the 200-day moving average has been reached. Moreover, we are now seeing its breakdown and it is not yet clear whether it will be a false-break.
Technically, we might see further declines in the WTI once it reaches the SMA200. This is not out of the question if concerns carry over into the new trading week. The nearest target to the south would be the support level of $60/bbl.
Let’s see how worrisome the fundamental backdrop looks. A new and more dangerous strain of coronavirus has triggered a wave of fear about a slowing economy.
On the oil side, energy demand will fall if connectivity between countries is cut and countries close on new lockdowns. EU countries, the UK and India, announced stricter border controls as recently as Friday. This comes amid a supply expansion amid a release of US strategic reserves.
OPEC+ has also been concerned about the issue, as the cartel of exporting countries is due to meet on December 2 to decide on production levels. The organisation will now assess whether the new strain is dangerous to the market.
The fall in prices on Friday was mainly due to an expectation factor. It is possible that it was partly exacerbated by a thin market effect as major US players celebrated Thanksgiving.
The future fate of both WTI and risk assets will depend on how high the current threat is recognised. A new week is likely to clarify and perhaps stabilise the situation. Perhaps things will not turn out to be so dire.
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