Crude oil price on the Brent variety is trading lower this Tuesday as Russia’s energy minister Alexander Kovak confirms that the Kremlin is still in talks with the OPEC + group (i.e. OPEC and its allies) on the proposed production cuts.
The drop in crude oil price is attributable to the market interpretation that ongoing talks are an indication of Russia’s continued reluctance to support deeper production cuts as well as an extension of December’s cuts until June; two critical components of the OPEC+ proposal. This is also coming on the backdrop of continued coronavirus-related fears, with China confirming new cases as well as deaths from the coronavirus, with numbers remaining in 4-digit and 3-digit categories respectively. Therefore, while global spread and number of fatalities outside China continue to stay limited, the coronavirus outbreak is still very much alive and active in mainland China. China is the world’s second-largest importer of crude oil, and the coronavirus outbreak has forced China to close entire towns and industrial districts to contain the epidemic, sparking fears of reduced demand and lower prices.
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Technical Outlook for Brent Crude
Crude oil price on the Brent has taken a turn lower after it was firmly rejected at the 57.54 resistance level which I had identified in my prior analysis of this asset. The initial target is the 55.59 mark, a recently broken resistance that will now reverse roles to function as a support. Underneath this area, 53.26 (troughs of W harmonic pattern) could become relevant if 55.59 is breached.
On the flip side, price recovery could target 57.54 once more, with 58.69 and 60.26 being the immediate upside targets. 62.21 and 63.71 continue to remain as upside targets, and only a healthy return of risk sentiment (such as Russia agreeing to new production cuts or the end of the coronavirus outbreak) could produce such an outcome.
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