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Oil prices reach 7-week minimums

Oil prices fell to their lowest level in the last seven weeks of trading amid API reports and rising US oil inventories and concerns over the spread of the deadly strain of coronavirus.

 

According to API data, oil reserves increased by 1.6 million barrels per week. Later, a weekly report from the US Department of Energy will be presented as part of which a 1 million barrels reduction is expected. The API data shows that actual data may be worse than market expectations.

 

The situation on stock exchanges has a negative effect on oil. Major indices are trading in the red zone amid concerns about the possible spread of the dangerous coronavirus. Today, the Chinese authorities decided to terminate transport links with the 11 millionth city of Wuhan, which has become a source of the spread of the virus around the world. Confirmed infections have already been reported in Hong Kong, the USA and the Chinese province of Macau. Not yet confirmed cases of infection have been reported in Japan, Russia and Mexico.

 

Regarding the chart, bearish signals are locally dominant. The price broke through support at the levels of 57.60 and 56.70. The next goal for the movement is the level of 55.05.

 

  • Resistance levels: 56.70, 57.60, 59.00;

 

  • Support levels: 55.05, 54.00, 52.90.

 

The main scenario - a correction towards 56.70 and the resumption of the downward movement.

 

An alternative scenario - a decline towards 55.05 from current levels.

 

The fundamental outlook is moderately negative. The chart is dominated by bearish signals. We consider shorts when the price rolls back to 56.70.

 

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