New concerns about India’s devastating coronavirus 2nd wave erased crude oil price gains made earlier in Wednesday’s New York session. Oil prices eventually slipped to a loss of 1.34%. These losses continued on Thursday as the numbers of new coronavirus cases continue to shatter records in the world’s 3rd largest oil importer.
Most of the gains recorded in crude oil over the last nine months have been primarily due to supply interventions from Saudi Arabia and the OPEC + alliance, occasionally fuelled by supply disruptions in Libya’s oil-producing belts and exportation terminals. Sanctions on Iran had also diminished that country’s input into the global supply chain. Now all that is about to change, and this could put downside pressure on crude oil prices.
OPEC+ is set to add 2.1 million barrels per day over the next three months as it loosens curbs. Iran looks set to have full output restoration as it progresses in negotiations over US sanctions. India’s continued COVID-19 situation could seriously hamper demand.
The combination of the current fundamentals and the bearish flag on the daily chart of the Brent crude benchmark indicates the potential for a steep near-term correction.
Technical Levels to Watch
Right on cue, the price was rejected at the 70.01 psychological resistance, strengthened by the upper boundary of the flag consolidation area. Price needs to break down the 67.74 and 66.81 support levels, along with 65.95 and 64.26, to initiate a flag resolution. The projected completion point of the measured move rests at 57.47, and this requires that sellers take out 62.21 and 60.07 along the way.
On the other hand, only a break above 71.44 would send Brent crude to new 2021 highs, but this move requires that the channel’s upper edge and the 70.01 resistance are uncapped.