WTI crude oil is still cruising lower inside its falling channel on the hourly chart and has just breached the mid-channel area of interest. This suggests that a test of the channel support may be in order.

The 100 SMA has crossed below the 200 SMA to confirm that the path of least resistance is to the downside or that further losses are in the cards. Price is also moving below indicators as an early signal of bearish momentum. Moving forward, these could hold as dynamic resistance near the mid-channel area of interest at $52.50 per barrel.

Stochastic is already indicating oversold conditions or exhaustion among sellers, and turning higher could indicate that buyers are taking over. In that case, crude oil could recover to the channel top at $53.50 per barrel next. RSI is also starting to pull higher from the oversold region to signal a return in bullish pressure.

Crude oil has been on weaker footing as the focus has returned to the resurgence of COVID-19 cases all over the world, prompting fears of more lockdown measures. This, in turn, could mean lower demand for fuel and energy commodities among businesses, and a general flight to safety away from riskier assets like commodities.

In its Short-Term Energy Outlook report, the EIA projected that WTI crude oil prices could average at $50 per barrel throughout the year, which would mean some downside from its current levels. The agency forecasts lower production from the OPEC and US producers in response to lower demand from countries dealing with the impact of the pandemic.

“Despite rising forecast crude oil prices in early 2021, EIA expects upward price pressure will be limited through the forecast period because of high global oil inventory, surplus crude oil production capacity, and stock draws decreasing after the first quarter of 2021.”