Crude oil and futures trading

Crude Oil Falls 4.4% as Covid Hits Shanghai

  • Crude oil futures tend to fall further amid rising Covid in China.
  • The release of the US oil supply may fuel the bears further.
  • The technical bias remains on the downside.

During mid-morning trading on April 11 in Asia, crude oil futures (CL) fell on concerns over China’s handling of the COVID-19 surge and stockpiling from consuming countries. The downfall continues throughout the day as we head into the New York session.

The futures contract for crude oil fell by $5 a barrel, or 4.40% from the Friday’s close of $98.75 to $93.75. 

Covid spread in China

Despite China’s COVID-19 concerns and aggressive central bank policies, oil price gains seem limited,” Stephen Innes, managing partner at SPI Asset Management, said in an April 11 statement. He further added that the emergency also put pressure on prices due to the release by the International Energy Agency of oil reserves.

Shanghai, the epicenter of the outbreak in China, continues to see an increase in the number of COVID-19 cases. On April 11, the local government announced a new record high of 26,087 cases, with 914 symptomatic cases and 25,173 asymptomatic cases as of April 10.

Media reports said that authorities in other cities, including Ningbo and Beijing, have begun imposing limited restrictions to curb the spread of the virus, a gloomy omen for oil demand from the world’s second-largest oil consumer.

The US to release oil reserves

The latest developments are likely to add to growing concerns about the outlook for oil after the IEA and the US announced about 240 million barrels of oil would be released in the next six months.

Oil swaps and spreads

In the Asian morning session of April 11, oil swaps in Dubai were lower than the previous close despite wider inter-month spreads. The June swap price was $94.74/bbl, 58 cents/bbl (0.61%) less than the close on April 8.

Over the same period in Dubai, the inter-month swap spread from May to June was fixed at 87 cents/b, an increase of 8 cents/b, and the June to July spread was fixed at 71 cents/b, an increase of 13 cents/b.

Crude oil (CL) daily open interest

Crude oil futures (CL) daily open interest
Crude oil futures (CL) daily open interest

The daily open interest for oil futures fell for two consecutive days while the price was on the downside. However, the bias is not yet moved to the downside.

Crude oil (CL) price technical forecast: Bears eying $90.00

Crude oil futures (CL) 4-hour chart
Crude oil futures (CL) 4-hour chart

The 4-hour chart for CL shows a strong bearish trend as the price moved below the 20, 50, and 100 SMAs. The next aim for the sellers is to test the $90.00 level. The $90.00 area may serve as a strong demand zone where you may find some opportunities to buy.

The volume data shows that the declining prices have a rising volume. It shows the strength of the bears. Therefore, it is prudent to watch for bullish confirmation before entering any position.