Crude oil price is up today even as Saudi Arabia issues a dire warning with OPEC members, Nigeria and Angola. Brent, the international benchmark is up 0.70% to $42 while the West Texas Intermediate (WTI) is up by 0.65% to $40.0.
Crude oil price rises as Saudi breathes fire
Last month, OPEC+ members agreed to continue cutting production in their bid to boost oil prices. Their actions have helped stem the previous decline in oil prices.
However, the biggest challenge is that most countries are not complying. In the meeting, OPEC members identified countries like Iraq, Kazakhstan, Nigeria, and Angola, as key culprits. However, Saudi and Russia managed to convince Iraq to comply and compensate for its previous lack of compliance.
Now, Saudi Arabia has started to target Nigeria and Angola, two countries that have a history of non-compliance. According to the Wall Street Journal, Saudi Arabia has asked the two countries for a detailed description about how they plan to comply.
Failure to which, the country has threatened to start a price war with them. It could do this by offering its crude oil at a deep discount to the main customers like India and China. The implication of a new price war is that it would lead to a sharp decline in crude oil price.
Coronavirus cases rising
Crude oil price is rising for the second straight day as traders ignore the rising number of coronavirus cases. In the United States, the health ministry reported more than 54,000 new cases yesterday and the number is expected to continue rising. Indeed, Anthony Fauci said that the number of new cases could start reaching more than 100,000 in the future.
This is an important matter because it will lead to low demand as more people stay at home. Also, the US has been barred from visiting the European Union, which will also affect demand.
Perhaps, investors are enthusiastic about the falling number of crude oil inventories. In a report released yesterday, the EIA said that the country’s inventories declined by more than 7.9 million barrels. That was significantly higher the decline of 710,000 that analysts were expecting.
Crude oil price technical forecast
The Brent crude oil price is up for the past four straight days. It is trading at 42.45, which is higher than the 50-day and 100-day exponential moving averages. The price is also above the ascending trendline that connects the lowest points that are shaded below. This means that the upward trend is likely to continue rising as bulls target the next resistance level at $44.
On the other hand, a move below $40 will invalidate this trend. This price is along the 100-day moving average and is also an important psychological level.