Crude oil prices remained under pressure this Easter Monday as risk-off sentiment dominated the market. Saudi Arabia and Russia led the various blocs that form OPEC + to an agreement over the weekend to cut 10 million barrels per day in production to offset severely weakened demand in light of the coronavirus pandemic. However, this agreement by OPEC + has as expected, not led to a corresponding spike in crude oil price. With storage spaces filling up, the cut in production may only slow the amount of time it takes to run out of oil storage space; it will not lead to a spike in demand, which is the factor that is needed to get prices going.
US President Donald Trump hinted that cuts could go deeper than 10 million barrels. This view seems to have gained credence after Saudi energy minister Prince Abdulaziz bin Salman announced that state-owned oil firm Saudi Aramco could go below its current 8.5million barrels per day quota if needed. He also hinted that total global reduction of supply could hit 19.5 million barrels per day if supply cuts by OPEC+, G20 nations and SPR purchases are factored in.
Brent crude oil price is presently trading at 32.26, slightly lower than the day’s opening price of 32.72 and off intraday lows of 30.64 (propped up by the Saudi minister’s comments).
Crude oil price on the Brent benchmark continues to trade in the range formed by the 35.61 price level (ceiling) and the 32.91 price floor. Crude oil price still seeks a trigger to take it out of this range. A break of the upper barrier could target the 38.56 resistance level, with further resistance at 41.43 and 44.16 (50% Fibonacci retracement from 20 January’s swing high to 30 March’s swing low).
On the flip side, a breakdown of 31.92 targets the support levels at 28.83 and possibly 24.68. If price pushes lower, the 22.35 becomes an option. Multi-year lows seen in the early 2000s could come into the picture at sub-$20 price levels.