Oil market is slightly lower on Wednesday amid growing fears associated with the onset of the second wave of the coronavirus pandemic and the publication of disappointing API data on the dynamics of US oil reserves.
Investors are closely following the news from China and South Korea, where new COVID-19 loci began to appear again. Investors fear that weakening quarantine measures will lead to a new pandemic outbreak. An upward trend in energy demand in recent weeks may end.
Another factor of pressure on the price is API data on weekly oil reserves growth of 7.58 million barrels, with a forecast of 5 million barrels. As part of a report released today by the US Department of Energy, experts predict an increase in reserves of 4.1 million barrels. An API report suggests that actual data can be significantly worse than expected.
Against this background, investors ignore the initiative of Saudi Arabia and other OPEC countries to further reduce oil production. It’s worth noting that on Monday, Saudi Arabia announced that in June it will reduce production by another 1 million barrels to 7.5 million barrels per day. Other OPEC + countries are ready to join the initiative.
Regarding the chart, a flat trend remains unchanged. Bears keep the price below 26.90. The price will most likely break out of the flat downwards. The immediate price goal in that case would be the level of 23.20.
The main scenario - a decline towards 23.20.
An alternative scenario - a breakdown of resistance at the level of 26.90 and an increase towards 30.30.
The current fundamental outlook is moderately negative. We consider shorts in the range of 26.50-26.90.
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