The Organization of the Petroleum Exporting Countries (OPEC) has predicted in its latest monthly forecast that the global demand for crude oil for the rest of 2020 could fall by 9.47 million barrels per day (bpd). This is a slight increase in the demand drop predicted by the oil cartel, as it represents an increase of 10,000 barrels per day over the previous number.
Additionally, the cartel sees a rise in demand in 2021 by 6.54 million bpd. However, this prediction is about 60,000 less than the previous demand forecast of 6.62 million bpd. The oil cartel has therefore cut its 2021 forecast for demand for OPEC’s crude by 200,000 barrels per day.
OPEC notes the rise in coronavirus infections as a factor in its forecast. It also does not see the economic recovery achieved in the 3rd quarter of 2020, continuing into the 4th quarter. OPEC also notes the relative weakness in the short-term market atmosphere, given the “large overhang in middle distillate stocks.”
The report by OPEC has reinforced the headwinds being faced by crude oil prices in recent times. The price of the international benchmark (Brent crude) was trading higher today before the release of the report, but these gains have been pared, and the price is now off intraday highs seen at 42.66.
Crude oil price on the Brent is now trading at 42.14.
Technical Outlook for Brent Crude
Brent crude oil closed lower yesterday for the 2nd straight session, following reversal from the upper edge of the channel on the daily chart. Yesterday’s candle found support at the 41.43 support line, and bounced from there towards the 42.50 resistance, where it remains capped despite today’s upside violation of that level.
If there is follow-through selling on the back of today’s OPEC report and the intraday pullback, a retest of 41.43 could be on the cards. A breakdown of 41.43 allows 39.57 to come into view, as price aims to retake the lower edge of the channel. Only a decline below the channel allows crude oil price to attain 36.40.
On the other hand, a bounce off 41.43 which can surmount 42.50 is what is required for the crude oil price to push towards the upper wedge border. 44.16 and 45.39 remain viable upside targets if a risk-on event hits the markets.