Home > Is it safe to buy crude oil after plummeting 11% on COVID-19 variant news?

Is it safe to buy crude oil after plummeting 11% on COVID-19 variant news?

WTI crude oil price drops more than 11% on concerning news regarding a new COVID-19 variant. Is it safe to buy oil now that the price has dropped below $70? 

Crude oil bears had a great day today as the “black gold” plummets more than 11% on fears of a new COVID-19 variant that concerns the world. Such a move is unusual if we are to take Brent oil as a benchmark. For example, Brent oil had only dropped more than 10% on 14 occasions – not that often.

Coming back to the WTI crude oil price, both bulls and bears have a case here. On the one hand, the higher lows series has not (yet) been broken, meaning that the bullish case remains intact. But, on the other hand, the market’s rejection from dynamic resistance is so powerful that if combined with the COVID-19 variant news, it may lead to more downside.

Truth be said, a risk-off environment during holiday times (many market participants took a long weekend as Thanksgiving was celebrated Thursday)may amplify market moves. Indeed, crude oil is down double digits, and the only question now is what to expect on Monday’s opening?

Double top pattern at $84

The technical perspective favors both a bullish and a bearish case here. While significant, bulls may argue that the decline did not break the higher lows series market with blue on the chart above. As long as the series holds, the bullish case remains intact.

On the other hand, Bears may argue that this is the result of a double top pattern formed at $84. The weakness persisted from that moment on as the rejection from dynamic resistance may have started a bear market.

Crude oil fundamentals have been looking weak for a while

Fundamentals have been looking weak for the WTI crude oil price for a while. First, supply rebounded in September through November. Second, the coordinated plan to release oil from strategic reserves. And now, the fear of the new COVID-19 variant literally seals the deal.

All in all, both bulls and bears may have a case here. What we do know is that the WTI crude oil price is down more than $15 from its October peak.

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