Brent crude prices bounced from the bottom of $16 and settled around $30 per barrel, which seem to be a physiologically strong resistance level. This balance may sustain as many contrary factors affecting crude prices.
From the demand side, there is a positive factor of a certain easing of restrictions imposed against the pandemic in many countries. Signs of business activity are emerging andthe driving season is close to opening. But there are also worries that the recovery in demand will be slow and it will not reach 30% of its fall or 30 million bpd.
The supply side is also full of contradictions. The OPEC+ deal to cut the production by 9.7 million bpd has been running since May 1. Saudi Arabia, Kuwait, and United Arab Emirates announced additional production cuts by 1,18 million bpd on top of the deal. The US has cut production by one million bpd already. But the pledged cuts and the current reduction of crude output are certainly not enough to balance the demand while the reserves of oil in storages are still rising. Reuters, citing an unnamed source in OPEC, reported that OPEC+ is looking to extend the existing 9.7 million bpd cuts past June instead of scaling cut backs to 7.7 million bpd from July under the existing deal.
Financial markets have an uncertain tune too, and this affects the "black gold" prices. The appetite for risk is changing to caution and pessimism. Markets are under pressure from renewed trade and geopolitical tensions between the US and China as the United States Senate brought in a bill to sanction China on the covering up of important information about the origin or spread of the COVID-19 infection.
There are no new important issues that are likely to affect the oil market this week. However, weekly data on crude inventories in the US, which is to be released on Wednesday evening and the statement by Federal Reserve's Chair Jerome Powel may add volatility to oil prices.
Technically the correction from the peak price of $36.3 per barrel in April to the current level of $30 per barrel corresponds to the Fibonacci retracement level of 76,4% on the daily timeframe. This level may serve as a support for Brent crude prices. If this support level is broken, this could mean prices may fall to the beginning of the impulse at $26-$26.5 per barrel.
This week, with contrary factors affecting the price of oil, is expected to keep prices in the existing trading area of $28-$32 per barrel of Brent crude benchmark.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
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. 76% 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.
© 2011-2020 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 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.