Brent oil bounced from $58 a barrel, an October 2019 low, where it plummeted from $66 a barrel on Jan. 20 amid coronavirus fears. The sharp drop in oil prices emerged on concerns that demand for oil could drop because market demand will become weaker. However, the negative effect on the world economy due to the virus could be overestimated so far. Thus, an emotional pressure on oil prices could be seen as too excessive. More objective support factors could gradually affect the price of oil.
OPEC wants to extend current oil output cuts until at least June, according to Reuters. Additional cuts might also be on the agenda if oil demand significantly shrinks and prices continue to fall. Barclays forecasted a decline in oil demand from 600,000 to 800,000 bpd in the first quarter of 2020 and as much as 200,000 bpd for the whole of the year. OPEC could act according, with Libya supplies suspension easing the scope of additional cuts
China is well organised to tackle the virus and the swift efforts of the Chinese government has limited the spreading of the virus.
Moreover, the Federal Reserve (Fed) is expected to maintain dovish rhetoric after its meeting on Jan. 29.
The continuation of loose monetary policy by the Fed may give an additional positive sign to the commodities market.
The price of oil is now cautiously moving up and may continue to extend above $59 a barrel. Nevertheless, it is too early to treat this move as a full-fledged correction, but it could perhaps be considered as a temporary break in downward movement of the oil price. Technically, if the support factors are sustained and no further negative news about the virus surfaces, the price may continue to rise to the next resistance levels of $62-63. But even in this case, the general downward trend may continue to evolve. This trend may be flipped once the Brent price consolidates above $66.1 a barrel.
If the virus spreads uncontrollably, this may cause unforeseen consequences and other risks may escalate matters further. This may cause Brent prices to continue to slide to technical support levels of $56.2-$57.4 a barrel.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Indiscriminate reliance on illustrative or informational materials may lead to losses.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2022 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.