Crude oil prices opened the new week lower on renewed concerns related to supply and demand forecast.Fundamental analysis: Uncertainty surrounding supply and demand outlook
Brent crude futures and U.S. West Texas Intermediate (WTI) fell last week as investors were worried over the pandemic’s unclear impact on fuel demand and increasing supplies from major producers.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, also known as the OPEC+, decided to hike supplies by 2 million barrels per day between May and July, weighing on the two contracts.
World’s oil inventories are expected to continue dropping, however, analysts believe the fuel demand is likely to rise as well in the second half of 2021 as the global economic recovery gains momentum.
“A lot of destocking is going on, so we are well into the rebalancing process,” said Energy Aspects analyst Virendra Chauhan.
Still, physical markets will have to pick up before prices and inter-month spreads could climb. On the other hand, reimposed lockdown measures in some countries and issues with vaccination programmes could also affect the oil demand.
“Oil is currently in a wait and see mode, with market participants looking at the vaccination pace to understand when oil demand will recover further and at nuclear talks in Vienna to see when more Iranian barrels might come back,” said Giovanni Staunovo, a commodity analyst at UBS.
Axi’s head global markets strategist Stephen Innes expects oil prices to trade in a range between $60 and $70 as investors weigh address these factors.Technical analysis: Testing support
Crude oil prices are trading below the $60 mark after a bearish monthly close in March. The price action is now trading about 15% off the 1-year highs recorded last month after a move of over 3% lower last week.Crude oil weekly chart (TradingView)
Crude oil prices are now sitting at the ascending trend line that offers support near the $58 handle. A break lower will see the 100-DMA at $54.60 come into the play. On the other hand, crude oil traders may push the price action above $60 to test the horizontal resistance line near $64.Summary
Brent crude futures and U.S. West Texas Intermediate (WTI) slipped in recent days amid investors’ concerns over the pandemic’s unclear impact on fuel demand and rising supplies.