There are a whole host of reasons to think that the crude oil market may struggle.
The West Texas Intermediate Crude Oil market continues to go sideways more than anything else as there is no clear narrative as to where we are going next. With the concerns about the coronavirus dwindling the amount of demand for crude oil, it does make sense that we would struggle to go higher. Furthermore, there are a whole host of reasons to think that the crude oil market may struggle.
When you look at the global picture, it is very difficult to see where we go next, because we have a meeting by OPEC plus during the trading session that is going to discuss whether or not we will continue to see oil production cuts. Russia and Saudi Arabia want the production cuts to continue through 2021, but we have seen several countries cheat on the idea of production cuts. This continues to be a major factor in this market. The market has essentially been treading water while we wait to see what happens next, and I do not think that the attitude changes anytime soon.
Looking at the 50 day and the 200 day EMA, you can see that they are both flat and simply sitting right about where the market is right now. Looking at the chart, you can see that I have drawn a couple of lines, most notably the $36.25 level underneath as support, and the $43.50 level above as resistance. Looking at this chart, you can see that we are essentially in the middle of it so I think it is can be difficult to imagine a scenario where we have anything other than back-and-forth trading. With that being the case, I think that you can trade the extended moves to the top and bottom of this range, but beyond that, you are going to have trouble trying to get this market going for any significant amount of time. With this, the market is likely to see a lot of short-term back-and-forths and no real momentum.
Looking at the US dollar will probably be beneficial at this point because the greenback does tend to have a fairly important effect on the value of commodities in general. Crude oil is no different so that is something worth thinking about. If the US dollar starts to fall rather hard that could drive up the price of crude oil as it will take more of those dollars to buy a barrel of oil.