Crude oil prices climbed higher this Monday, mostly on the back of risky sentiment as traders pinned their hopes on faster global economic recovery and better manufacturing conditions.
However, sentiment on crude oil could quickly switch to a bearish one as the boost in oil output by the OPEC+ alliance is expected to kick in this month.
The dampening effects of the coronavirus situation in India, the world’s third-largest oil producer, could also kick in. Fuel sales have reportedly dropped due to weak demand, as India recorded 300,000 new coronavirus cases for a 12th straight day.
Crude oil prices could also face additional headwinds if Iran’s oil sanctions are lifted, allowing for added supply to the market.
Technical Outlook for Brent Crude
Brent crude oil is Friday’s drop was able to break down the support at 66.81 but failed to attain 65.95 as the 66.00 psychological price level stood firm. Today’s intraday gains resulting from risk-on sentimental shift have helped the Brent benchmark recover above 67.00. The immediate target lies at 67.74, with a break of this level targeting 70.01, where the flag’s upper border also provides additional resistance. Only if price breaks this psychological barrier and attains 71.44 does the flag lose its validity.
On the other hand, a resumption of the downward correction sees the price attempt to break down 65.95. If this is successful, then 64.26 and 64.26 needs to give way for the bearish flag to be completed. This completion also allows 62.21 and 60.07 to become logical targets for bears, with 57.47 serving as additional downside support that marks the measured move’s completion point.