Is January a good month for buying Crude Oil?

Written by: Stanko Iliev
January 17, 2021
  • The crude oil price has weakened on Friday, pressured by renewed coronavirus concerns
  • Coronavirus concerns could send crude oil price below $50 support again
  • If the price falls below $50, it would be a firm "sell" signal, and the next target could be around $45

Crude oil advanced to ten-month highs last week, but the price weakened on Friday, pressured by renewed coronavirus concerns. Travel restrictions and lockdowns will keep demand for oil at low levels for a while, and all of these could send crude oil price below $50 support again.

Fundamental analysis: We can’t still be sure when we can see a gradual return to pre-COVID oil demand levels

The crude oil price advanced last Wednesday to $53.9, but the price weakened on Friday, pressured by renewed coronavirus concerns and poor global macroeconomic data. The whole world has been facing the COVID-19 crisis for almost a year now, and according to the latest news, Germany might remain in lockdown until early April while the U.K. reported a new record-breaking death toll this week.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Vaccination is progressing slower than expected, and the negative news is that the Pfizer vaccine distribution could be delayed in the E.U. The situation is also not good in the U.S., but President Biden’s $1.9 trillion COVID relief proposal still keeps the market in a positive mood.

Over 2 million people have died of Covid-19 worldwide, and it is essential to say that China reported its first death in 8 months.

“China’s growing health crisis has led to a fall in oil as it is the largest importer of energy in the world. “The Beijing administration has put 22M people on lockdown due to rising COVID-19 cases, so oil demand fears are in circulation,” said CMC Markets analyst David Madden says.

These could add further pressure on crude oil price, and we should not be surprised if the price falls again below $50 support. Travel restrictions and lockdowns will keep demand for oil at low levels, which is certainly not good for its price.

The pandemic will not stop in the upcoming months, and we can’t still be sure when we can see a gradual return to pre-COVID oil demand levels. A rise of the U.S. dollar also pressured crude oil prices, and the $50 support level could easily be broken if the greenback pushes higher.

Tip: looking for an app to invest wisely? Trade safely by signing-up with our preferred choice, eToro: visit & create account

Technical analysis: Coronavirus concerns could send crude oil price below $50 support again

Crude oil advanced to ten-month highs last week, but the price weakened on Friday, pressured by renewed coronavirus concerns. New lockdowns worldwide and situations over fresh COVID-19 outbreaks in China could send crude oil price below $50 support again.

Data source: tradingview.com

The critical support levels are $50 and $45; $55 and $60 represent the resistance levels. If the price jumps above $55, it would be a signal to trade crude oil, and we have the open way to $60.

On the other side, if the price falls below $50, it would be a firm “sell” signal, and the next target could be around $45 support.

Summary

The crude oil price advanced last Wednesday to $53.9, but the price weakened on Friday, pressured by renewed coronavirus concerns. New lockdowns worldwide and concerns over fresh COVID-19 outbreaks in China could send crude oil price below $50 support again.