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Oil market is under pressure once again

Oil prices continue to decline despite the new agreement to limit production established by the OPEC + countries.

 

Even before the OPEC + video conference, many analysts stated that the agreement was concluded too late and the agreed production quotas were not enough to balance the market. The quarantine measures introduced in many countries lead to a further reduction in energy consumption. Decrease in demand still exceeds the agreed volumes of reduction in production. According to some estimates, demand fell by about 30 million barrels per day. OPEC + countries agreed to reduce production by only 9.7 million barrels per day. Oil reserves are growing, as evidenced by the data published recently by the API. Over the reporting week, commercial stocks grew by 13.1 million barrels.

 

The prospects for the development of the global economy for 2020 and subsequent years do not inspire optimism among investors. According to the IMF, the global economy has entered a stage of recession and this year, global GDP decline may reach 3%. A contraction in the global economy will inevitably be accompanied by a decrease in energy demand.

 

We can expect the restoration of oil prices only after the normalization of the situation with the overall oil demand which may take months.

 

Today, the market will be focused on the US Department of Energy data regarding oil reserves. Experts predict an increase in reserves by 11.7 million barrels, after a record increase of 15.2 million barrels per week earlier.

 

The chart is dominated by bearish signals. Price pushed support at the level of 26.90. The next stop of the price movement can be expected around 25.50.

 

  • Resistance levels: 29.00, 30.30, 33.75.

 

  • Support levels: 26.90, 25.50, 23.20.

 

The main scenario - a decline towards 25.50.

 

An alternative scenario - a consolidation above the level of 26.90 and growth towards 29.00.

 

The fundamental outlook is negative. We give preference to shorts. Entry points should be considered at the levels of 27.50 and 29.00.

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