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Oil prices decline due to oversupply on the market

The oil market on Thursday headed in different directions. The cost of Brent crude oil dipped by 0.1% and WTI remained in positive territory with an increase of + 0.4%.

 

A gloomy forecast for global economy development, a record drop in energy demand and rising oil reserves in the United States limit the possibilities for recovering oil prices. The market remains under strong pressure.

 

Despite the OPEC + agreement to reduce production quotas by 9.7 million barrels per day, the market remains unbalanced. The supply volume is still significantly higher than the demand level. According to the International Energy Agency, in April, oil demand may fall by 29 million barrels per day, which is almost three times the volume of production reduction under the OPEC + agreement.

 

Experts continue to say that oil prices will remain under pressure until the pandemic weakens and energy demand recovers. Only in this case can the market again achieve a state of balance.

 

Regarding the chart, the price tested the support level of 25.50 yesterday. Now the recoil movement is developing. As the bulls still cannot cope with the resistance at the level of 26.90, the scenario with further downward movement towards the level of 23.20 remains a priority.

 

  • Resistance levels: 26.90, 29.00, 30.30.

 

  • Support levels: 25.50, 23.20, 21.30.

 

The main scenario - a breakdown of support at the level of 25.50 and a decline in the direction of 23.20.

 

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

 

The fundamental outlook is negative. We still prioritize shorts. Entry points are to be sought after near the level of 26.90.

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