Crude oil price on the WTI and Brent oil benchmarks are shedding weight today after a blistering run that has seen it climb off multi-year lows to top $35 in the last two weeks. Traders appear to have been spooked by the subtle re-emergence of US-China tensions. The first salvo was fired yesterday after Global Times quoted the speaker of the NPC Parliament Zhang Yesui as saying that Beijing would “firmly defend its interests if the US does things that undermine China’s core interests.” However, another takeaway from the annual NPC/CPPCC sessions is now stoking new tensions in an already charged atmosphere, as a new security law for Hong Kong appears to be in the offing. The US has traditionally opposed attempts by China to dictate the affairs of governance and security in Hong Kong. With comments made by US President Trump two weeks ago about the possibility of seeking compensation from China over the coronavirus pandemic, the stage appears set for a new round of confrontations between both countries.
Brent crude currently trades at $34.88 or 3.01% lower on the day, having bounced off intraday lows of $33.57.
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Technical Outlook for Brent Crude
Brent crude has not been able to breach the resistance at 35.61, despite attempts at doing so since Wednesday. This price level marks the price projection point from the breakout of the bullish pennant. Now that Brent crude has completed the measured move from the pennant breakout point, price now appears reluctant to advance. A solid rejection at the current area could initiate a pullback towards the former resistance that now acts as a support at 31.69. A breakdown of 31.69 opens the door for 28.38 to make a renewed entrance into the playbook as additional support. Below this level, support levels at 24.68 and the multi-year support at 22.35 continue to remain relevant to any selloff.
On the flip side, a resurgence of bullish action which breaks the 35.61 resistance would allow Brent crude to target the 38.56 resistance (peak of 11 March). Above this level, the door would be open for Brent crude to target the resistance at 41.43, which allows the asset to hit the elusive $40 a barrel mark.
More headlines from the US and China regarding the pronouncements on Hong Kong from the NPC/CPPCC annual meetings may still dictate price action heading into next week.