Crude oil price on the various benchmarks plunged to 18-year lows as fears of the coronavirus outbreak’s economic impact on oil demand spooked investors on Monday.
The US oil rig count reported by Baker Hughes was lower last week. The rig count dropped to 624, as lower oil demand and falling prices makes it economically unsustainable to keep many oil rigs at work.
Downside pressure continues to weigh on the commodity as Saudi Arabia’s price war with Russia continues. Saudi Arabia has concluded plans to ramp up exports of crude oil by 12 million bpd as from April 2020. However, there are reports that US President Donald Trump intends to speak to Russian President Vladimir Putin over the issue. This may be viewed as a form of mediation and may provide short term relief for Brent crude price, which is trading at 2020 lows of 22.36 as at the time of writing.
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Technical Outlook for Crude Oil Price
The crude oil price on the Brent benchmark trades at 18-year lows at the moment. Downside pressure could continue to take the price even lower than the $20 per barrel that was forecast by Goldman Sachs a few weeks ago. This could allow crude oil price to push even lower, targeting the October 2001 lows of $16.92. Further selloffs may even present an opportunity for crude oil price to retest the 1998 lows at just under $10 per barrel.
On the flip side, temporary relief could come from possible US intervention in the situation, which may either get the Russians on the same page with the Saudi-led OPEC bloc, or to get the Saudis to abandon the price war initiatives that will see it flood the market with crude. This relief may allow prices to bounce back to the 18 January 2016 lows of 28.38 initially, with last week’s low of 31.92 (also previous low of 15 February 2016) lending itself as a potential resistance target if such recovery holds up well.
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