Crude oil price has inched lower today as the market reacts to the rising Covid-19 cases around the world. The price of Brent (XBR), the global benchmark, has dropped by 1.10% to $42.88. West Texas Intermediate (WTI), on the other hand, has dropped by 1.05% to $40.53.
The price of oil is suffering from a confluence of demand and supply issues. On demand, the rising number of Covid-19 cases lead to fears that people and companies will consume less oil for longer. Indeed, oil traders are already suffering from weak demand. A trader told S&P Global that, “Exports are tough in November, demand is weak and isn’t there.”
It’s easy to see why oil demand has evaporated. Major cities like London, Frankfurt, and Paris have gone into a high level of lockdown as the number of Covid-19 cases increases. These lockdowns will continue as these countries move to the cold season.
Furthermore, air transport will not rebound any time soon. In a statement, OPEC secretary general said, “We are on the course to recovery, but we have to be realistic that this recovery is not picking up pace at a rate that we earlier expected in the year.” Also, according to Reuters, China has halted its oil-buying bonanza in recent days.
At the same time, supply is expected to rise. In the United States, the hurricane season has not been as worse as previously-expected. And countries like Libya and Iraq are boosting production. Saudi, on the other hand, has signaled that it won’t be supportive of oil market, for now.
Brent crude oil price technical outlook
The hourly chart shows that Brent crude oil price is between the $41.32 and $43.2 support and resistance levels. The price is also between the standard pivot point and the first resistance level. It is also along the middle line of the Donchian channels.
For the rest of the day, with no major data expected, I suspect that the price will end the week at the current range. As such, the key levels to watch will be today’s low of $42.37 and yesterday’s high of $43.20.