Oil prices facing tough resistance on a fundamental basis, supported on a technical basis

• The price of a barrel of oil on Tuesday was yet again on the back foot.
• The mood in financial and commodity markets is being dictated by the deterioration of prospects for a solution between the US and China.
• On the downside, a break below the 50 handle opens the 46.90 level.

The price of a barrel of oil on Tuesday was yet again on the back foot, and bullish attempts meeting fierce opposition. West Texas Intermediate crude on a spot basis was down -0.20% at the time of writing, having travelled from a high of $53.26 to a low of $51.79. 

The mood in financial and commodity markets is being dictated by the deterioration of prospects for a solution between the US and China with respect to the trade dispute saga. The US continues to turn the screw on China with the latest headlines reports on Tuesday reporting US administrations intentions to restrict capital flows into China, particularly investments form government pension funds.

The US also blacklisted 28 Chinese companies due to alleged role in human rights violations against Muslim minorities. These recent moves come in the same week that the US and China are supposed to be meeting to find a way to resolve their disputes, but the bar couldn't be higher and investors are responding in kind. Commodities and especially oil will always struggle in this environment.  Subsequently, the futures markets were struggling to stay above water with the WTI crude contract for November delivery losing 39 cents, or 0.7%, to $52.36 a barrel on the New York Mercantile Exchange. 

Bears looking to a break below $46.90/bbl

At this juncture, heads turn to OPEC for a solution, but with their next meeting some way off, the demand side of the equation could dominate the foreseeable future which opens prospects to below the $50 handle. 

"When the supply side of the equation is the concern, OPEC policy has proven to be successful, but the cartel's effort may prove fruitless when demand is the issue, which raises major concerns for the energy market. While we don't expect significant CTA flow in the near-term, WTI crude is in the crosshairs as a break below $46.90/bbl could lead the trend follower complex to increase their shorts,"

Analysts at TD Securities (TDS) argued, 

WTI levels

Technically, the 21-DMA is located around 55 the figure ahead of the 200-DMA that resides around 56.90. On the downside, a break below the 50 handle opens the Nov 2018 lows at 49.39 which are guarding that 46.90 level as the analysis at TDS highlighted ahead of 18th Dec lows at 45.77 ahead of the Dec double bottom lows below 42.50.