Oil At A Crossroads As COVID-19 Infections Surge

U.S. West Texas Intermediate crude oil futures are trading mixed at the end of the week and poised to close lower for the week as inventories rose and record-breaking new coronavirus cases in the United States stoked concern about the pace of economic recovery and fuel demand. Meanwhile, the International Energy Agency (IEA) bumped up its 2020 oil demand forecast on Friday, but warned that the spread of COVID-19 posed a risk to the outlook.

“While the oil market has undoubtedly made progress…the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control,” the IEA said.

Prices also dropped after Libya National Oil Corporation announced it had lifted its force majeure on all oil exports after a half-year blockade by eastern forces.

The new worries about fuel demand surfaced just one day after data from the U.S. Energy Information Administration showed U.S. gasoline stockpiles fell by 4.8 million barrels last week, much more than analysts expected, as demand hit its highest level since March 20.

Investors are starting to lighten up on the long side because they feel support will disappear after this week as coronavirus cases are surging in several U.S. states. A spike in coronavirus cases across several U.S. states raised the prospect of renewed lockdowns and other restrictions that would dent any sustained recovery in fuel demand.

Apple Maps Driving Activity is Slowing Again in Warning Sign for the Economy:  CNBC

As coronavirus cases surge across the United States, Apple Maps data shows a slowdown in requests for driving directions, a potential warning sign as the country works to restart the economy amid the pandemic.

The four states that are the leaders in average daily new reported cases over the past week, according to Johns Hopkins University data – Florida, Texas, California, and Arizona – have each seen a recent decline in driving directions requests.

While the Apple mobility data is just one signal that may provide insight into what the future will bring for the U.S. economic comeback, it’s an example of the kind of “high-frequency” indicators some investors are keeping an eye on.

Economic data reports typically lag by a month or so, and may not capture the most recent developments caused by the fast-moving virus.

June’s job report, for example, showed promising employment gains but did not account for the recent resurgence in coronavirus cases due to the timing of the government survey.

Russia Does Not Plan Saudi Talks Ahead of OPEC+ Monitoring Meeting:  Kremlin

The Kremlin said on Thursday Russia currently had no plans to hold talks with Saudi Arabia ahead of a joint OPEC+ ministerial monitoring committee meeting due to be held next week, Reuters in Moscow reported.

Weekly Technical Analysis

Weekly August WTI Crude Oil

Trend Analysis

The main trend is down according to the weekly swing chart, however, momentum continues to trend higher. The main trend will change to up on a trade through $54.71. A trade through $20.28 will signal a resumption of the downtrend.

The minor trend is up. This is controlling the momentum. A trade through $41.63 will indicate the momentum is getting stronger, while a trade through $34.66 will change the minor trend to down.

The main range is $62.21 to $20.28. Its 50% to 61.8% retracement zone at $41.25 to $46.19 is resistance. This zone stopped the rally at $41.63 two weeks ago.

The short-term range is $20.28 to $41.63. If the minor trend changes to down then its retracement zone at $30.96 to $28.44 will become the primary downside target.

The new minor range is $34.66 to $41.63. Its 50% level at $38.15 has been providing some support.

Weekly Technical Forecast

Based on the recent price action, the direction of the August WTI crude oil market the week-ending July 17 is likely to be determined by trader reaction to the main 50% level at $41.25.

Bearish Scenario

A sustained move under $41.25 will indicate that sellers are still defending the downtrend, or betting on lower prices. If this creates enough downside momentum then look for the selling to possibly extend into a downtrending angle at $35.21.

Crossing to the weak side of $35.21 will put the market in a bearish position. This could lead to a test of the minor bottom at $34.66.

The minor bottom at $34.66 is a potential trigger point for an acceleration to the downside with the next target $30.96.

Bullish Scenario

Overcoming and sustaining a rally over $41.25 will signal the presence of buyers. The first upside target is a steep uptrending Gann angle at $44.28. Crossing to the strong side of this angle will put the market in a bullish position. This could lead to a test of $46.19, followed by a downtrending angle at $48.71. This is the potential trigger point for an acceleration to the upside.

Weekly Technical Outlook

The price action the past six weeks has clearly shown that the key level to overcome for the bullish traders is $41.25. Traders seem to be reluctant to buy strength which will be necessary to overcome this level. If they grow tired of trying to trigger a breakout then they may just settle for starting a pullback into the short-term retracement zone at $30.96 or $28.44.

Bullish traders have to decide whether to chase the market higher and fuel a breakout to the upside, or play for value and let the market correct into a support zone.

Weekly Fundamental Outlook

The question traders are asking themselves ahead of the weekend is: Will the rapidly rising COVID-19 in the United States affect demand enough to drive up crude oil and gasoline inventories?

This question won’t be answered until next week’s American Petroleum Institute (API) and Energy Information Administration (EIA) weekly storage reports are released.

In the meantime, there will be a lot of speculation and with that will come volatility and two-sided trading. At this time, traders seem to be following the lead of the equity market traders and shrugging off the coronavirus numbers, while maintaining their focus on a V-shaped recovery for the economy. But crude oil traders can’t hide behind the stock market rally for too long before reality finally sets in.

Big jumps in inventories next week will likely light the fuse for an eventual break back to $30.96 to $28.44 over the near-term, while steady to lower inventories readings may finally give traders the confidence needed to successfully overcome $41.25.