Crude oil prices surged on Tuesday by more than 3% as investors took gambles on a recovery in oil demand, despite pervasive fears that rising coronavirus infections could precipitate new lockdowns. Crude oil price on the Brent benchmark rose by 3.5% on Tuesday and currently trades at 44.40.
So far, crude oil prices have been helped by last week’s colossal drawdown in US inventories, despite the reduction on production curbs agreed to by the OPEC + alliance on the same day. The EIA and OPEC have revised their demand outlook upwards, with the latter forecasting demand in 2020 to rise to 90.72 million bbl/day. Non-OPEC supply is forecast to be lower in 2020 by 3.26 million bbl/day.
These are all helping the black gold to maintain a bullish push in the market. However, the real test of the situation comes when the OPEC + production curbs kick in next month.
Technical Outlook for Brent Crude
The rising trendline which connects the lows of price on the daily chart from 12 June till date, remains the pivot on which bulls are operating. Price bounced from this line today after registering a pinbar yesterday and now challenges the resistance at 44.16. The confirmation of the breakout must come from two successive closing penetrations by daily candles above this level. The breakout also closes the downside gap of 6 March and would set Brent crude on the path towards 48.33 and possibly 50.64.
On the flip side, failure to breach the 44.16 resistance keeps crude oil price within the tight range that exists between this price level and the ascending support trendline. Only a breakdown of this trendline allows crude oil price to dip to 41.43 and possibly 38.56. Price may only fall below this if there is a significant worsening of the fundamentals, such as new lockdowns that affect factory activity and cause depression of demand.