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Crude Oil Prices Edge Lower, But Could Retain Bullish End to the Week…

Crude oil price
Crude oil price

Prices of the American reference for the sweet light crude oil retreat for the third consecutive session at the end of the week, always against the backdrop of negative prospects for the demand of the commodity in the current context of the fast-spreading pandemic.

In fact, traders continue to gauge the persistent increase in COVID-19 cases across the globe vs. tighter restriction measures in many countries, all putting extra pressure on the demand for oil and undermining at the same time the economic recovery.

In addition, the IEA revised lower its demand forecast by nearly 9 mbpd for the current year earlier in the week, collaborating with the downbeat mood among traders.

This is coming on the backdrop of confirmed compliance by OPEC + alliance members on the production cuts that were allocated in the last adjustments. Reuters is reporting that October compliance levels stood at 101%, citing two OPEC + sources close to the situation. Russia also confirms that it has met complete compliance requirements on its part. 

Despite today’s decline, the third for the week as at the time of writing, Brent crude looks set to end the week higher as overall risky sentiment showed resilience.

Technical Levels to Watch

The daily chart on the Brent crude benchmark reveals an evolving 1-2-3-4-5 pattern, with the retracement of the last three daily sessions forming the 4th wave. If we are to expect a 5th wave to complete the impulse wave that commenced on 2 November candle, then we should see this from a bounce on the channel’s upper edge or the 42.50 support level. This move would then see the 5th wave targeting termination at the 46.41 resistance level (31 August high).

On the flip side, a breakdown of the 42.50 support targets the 41.43. Further decline below that area negates the 1-2-3-4-5 pattern and opens the door to a break of the $40 psychological support, targeting 39.57, where the cluster of lows of early September are found. 

Brent Crude; Daily Chart