Oil prices remained heavy as WTI futures scraped along below the 12-day low seen yesterday at $22.03. Crude markets have been underwhelmed by the near 10 mln barrels per day output cut of the OPEC+ group.
US President Trump said he thinks OPEC+ will agree on a 20 mln barrel per day cut by the end of the month. Meanwhile on the coronavirus front: Northeastern China reported an increasing rate of infection, the UK lockdown has been extended to May 7th, and the France lockdown to May 11th. Nine US states, meanwhile, are planning the unlocking of their economies, while a number of European countries, and the likes of Australia and New Zealand, are also discussing how and when to get their economies back to work. These have further deducted the demand for oil.
As stated in our Oil Outlook 2 weeks ago, “Demand concerns remain a key driver as well, as countries continue to go on complete lockdown due to COVID-19 while they have set very strict travel restrictions …..The overall outlook remains strongly bearish unless OPEC+ does take steps to agree on a new output cut plan in the 2H of 2020, although even a coordinated move like this would not easily bring the Energy market into balance.“
Hence, based on the assumption that oil producers will struggle to fully plug the demand/supply imbalance despite the OPEC+ deal, Oil’s overall outlook remains under a lot of pressure, while it has been in a range between 19.00-29.00 since March 18. If we focus on the past 2 weeks though we can see that the bulls are struggling as the oil market is still cautious despite the agreement, with huge bearish consecutive candles this week.
Intraday indicators are negatively configured with RSI unable to move away from 30 barrier and MACD forming a bearish cross as we move ahead of the US session. That said, any swing higher could retain a selling the strength approach, unless there is a decisive swing above 24.00 Resistance intraday. In the medium term though, a positive shift to the outlook for this week would only be possible if we see market action above the 25.00-25.50 barrier (R2 and 50% Fib level for April).
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Andria Pichidi
Market Analyst
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