Crude oil price on the Brent benchmark and WTI are set to end the week on a lower note after the proposed deal by OPEC + to cut production outputs met a stone wall from Mexico. Mexico has opposed the 10 million bpd output cuts agreed by other members of the OPEC+ bloc, leaving the oil markets in a quandary as the Easter weekend kicks off.
Crude oil price had risen in the last two days on expectation of the deal which had gotten a recalcitrant Russia on board. But Brent crude is now 8.87% lower as traders have been left disappointed by the latest setback.
Crude oil prices have been under tremendous pressure in the last two months as the coronavirus pandemic effectively shuttered demand. As it is, the coronavirus pandemic is showing no signs of abating and the extent of the negative economic impact that will follow is also not fully known.
Latest reports being monitored from the virtual meeting is that Mexico may sign off on the deal, albeit reluctantly. Experts cite Mexico’s planned $13.5billion energy investment to boost the country’s production to 2million barrels per day by the end of 2020 as the reason for their opposition. The production cuts will mean that Mexico will see its production capped at 1.25 million barrels per day, which negates its planned production targets.
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Technical Outlook for Crude Oil Price
Today’s price drop means that Brent crude was unable to break the resistance at 35.61. Price is now retesting support at 31.92. A breakdown of this support could open the door for crude oil price to resume testing multi-year lows that were recently seen at 28.38, 24.68 and 22.35.
However, a ratification of the production cut deal could allow crude oil price to rebound past 35.61, in which case it could aim for resistance targets at 38.56 and 41.43. 44.16 (50% Fibonacci retracement from 20 January swing high to 30 March’s swing low) could also be a veritable target. However, any recovery made at this point could be limited. True recovery of crude oil price will only happen when demand picks up.
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