The oil market opens a trading week in the red zone amid continuing concerns about energy demand and the aggravation of trade relations between the US and China.
Over the weekend, the White House administration accused China of creating the COVID-19 virus and hiding information about the extent of the virus in the country. Donald Trump threatened to withdraw the United States from the trade agreement and to strengthen sanctions against China. Investors believe that a resumption of the trade war will have dire consequences for the oil market, as the United States and China are the largest energy consumers in the world.
Another factor of pressure on the oil market is the USD dynamics. The dollar index strengthened by 0.3% today, making oil and other commodity assets more expensive for foreign investors.
It’s worth noting that from May 1, Russia, Saudi Arabia and other OPEC + countries should begin a systematic reduction in production volumes to stabilize oil prices. However, traders fear that these volumes will not be enough and the imbalance in the direction of excess supply in the market will remain unchanged. Therefore, oil prices will remain under pressure.
Regarding the chart, it is worth noting a flat with borders at the levels of 19.50-21.50. Now bears are increasing pressure at the level of 19.50, so the price going below the flat is the main scenario for today.
The main scenario - a breakdown of support of the level of 19.50 and a decline towards 17.00.
An alternative scenario - a consolidation in the range of 19.50-21.50.
The current fundamental outlook is moderately negative. Within the daily framework, we prioritize shorts. We are expecting to find entry points near the level of 21.50.
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