Crude oil prices are experiencing a rebound today on a Reuters report of a possible extension of production cuts agreed in the December 2019 meetings until June. Reuters is citing OPEC sources close to the situation as saying that the oil cartel could extend the production quota cuts agreed on until June if crude oil prices and demand from China continue to drop as a result of the ongoing coronavirus outbreak. The report further added that the option to impose deeper cuts and to extend these to year-end were also on the table.
So far, the death toll and the number of new cases from the coronavirus outbreak continue to rise, and this has led to massive risk-off sentiment in global markets. Crude oil prices on both the WTI and Brent crude varieties have taken a hammering, with Brent crude falling as much as 18% since the January 8 peak at 71.28.
However, the Reuters report seems to have brought some relief to crude oil prices, as a mild intraday rebound has occurred on Brent crude. As at the time of writing, Brent crude was trading at $59.28.
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Technical Outlook for Brent Crude
Yesterday’s steep price fall extended to the 58.69 price support identified as a potential target in my article of yesterday. The Reuters report has enabled Brent crude to bounce off this level and post some intraday gains.
However, more sustained upside needs to be seen for more significant recovery to kick in. 60.26 remains the initial upside target for any move with strong bullish momentum, with 62.21 and 63.71 hovering as resistance targets.
Resumption of the downside move is in keeping with the market fundamentals for crude oil, and sellers may merely be waiting in the wings to sell on possible rallies to the resistance areas mentioned above. Initial support from present levels lies at 54.47 (September 3 and October 2 2019 lows), with 55.59 not too far off as the next support target.
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