United States Oil (USO) slumps as U.S. bans travel from Europe over pandemic
Oil prices sank again on Thursday along with the broader market after the United States banned travel from Europe following a World Health Organization declaration that the coronavirus outbreak is now a pandemic.
Market worries were compounded by the threat of a flood of cheap supply as Saudi Arabia promised to raise oil output to a record high in its standoff with Russia.
Brent crude <LCOc1> was trading down $1.91, or 5.3%, at $33.88 by around 0339 GMT, slightly above earlier lows. The contract fell nearly 4% on Thursday.
U.S. crude <CLc1> was down $1.74, or 5.3%, at $31.24 after dropping 4% in the previous session.
Oil is down around 50% from highs reached in January.
Global shares also crumbled after U.S. President Donald Trump said the United States will suspend all travel from Europe as he unveiled measures to contain the coronavirus epidemic.
The travel ban, which excludes Britain, will hit U.S. airlines “extremely hard,” their industry association said.
The surprise move is likely to mean a further drop in demand for jet and other fuels in an already battered oil market though, for now, just how much is hard to quantify.
“A WHO declaration of global emergency and U.S.-EU traffic ban is dampening the global energy demand outlook, in conjunction with an intensified price war between Saudi and Russia,” said Margaret Yang, market analyst at CMC Markets in Singapore.
“Bears are dominating the oil market and there might be more downside before a bottom can be reached,” she added.
The United Arab Emirates followed Saudi Arabia in announcing plans to boost oil output after the collapse last week of an agreement between OPEC, Russia and other producers, a grouping known as OPEC+, to withhold supply and buttress prices.
UAE’s national oil company, ADNOC, said it plans to raise crude sales to more than 4 million barrels per day (bpd) and accelerate a push to boost capacity by a quarter to 5 million bpd.
“Without OPEC+, the global oil market has lost its regulator and now only market mechanisms can dictate the balance between supply and demand,” said Espen Erlingsen, head of upstream research at Rystad Energy, which estimates that oil will need to fall to the low $20s to achieve equilibrium.
The U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) have slashed forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.
Still, weekly data on U.S. inventories showed minimal effects from the coronavirus pandemic. Crude stocks increased by 7.7 million barrels, but inventories of gasoline and diesel fell sharply, as refining runs remain at seasonally low levels.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 10.33.
The projected upper bound is: 8.01.
The projected lower bound is: 5.64.
The projected closing price is: 6.82.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 20 white candles and 29 black candles for a net of 9 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 11.2623. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 7 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 23.17. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 7 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -146.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed down -0.300 at 6.940. Volume was 141% above average (neutral) and Bollinger Bands were 260% wider than normal.
Open High Low Close Volume___
7.020 7.090 6.839 6.940 65,179,100
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 8.79 11.00 11.55
Volatility: 189 93 59
Volume: 64,816,220 33,627,764 28,075,528
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND is currently 39.9% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 39 periods. Our momentum oscillator is currently indicating that USO is currently in an oversold condition.