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Oil prices are falling

Oil prices are lower on Monday as the spread of the pandemic and a new round of tensions between the US and China weaken the prospects for a rapid global recovery and energy demand.

 

The number of people infected with coronavirus in the world has exceeded 16 million. Most investors are still worried about the epidemiological situation in the United States. The virus continues to spread, forcing governments in many states to expand quarantine measures. Reserves data released last week showed that, amid a worsening epidemiological situation in the country, demand for energy began to decline. The negative trend can be continued.

 

Additional pressure on the market is exerted by increased geopolitical risks after the US and China exchanged the closure of each other's consulates. Investors fear the breakdown of the interim trade agreement, which will inevitably lead to a deterioration in the situation in international trade and a drop in demand for energy.

 

The hurricane season has begun in the North Atlantic. The first was Hurricane Hanna, which partially hit the Texas coast as a storm. Reports of a partial suspension of production in the Gulf of Mexico could provide support for the oil market, but production companies have said they do not intend to suspend operations and evacuate personnel from drilling platforms for now.

 

Today, the dominant influence on the oil market will be provided by investor sentiment on stock exchanges and the dynamics of the dollar exchange rate.

 

A horizontal price channel has formed on the chart with borders at the levels of 40.75-41.55. Today we expect a continuation of this flat trend.

 

  • Resistance levels: 41.55, 42.30, 43.75.

 

  • Support levels: 40.75, 38.70, 37.00.

 

The main scenario - a consolidation in the range of 40.75-41.55.

 

An alternative scenario - a breakdown of the support at 40.75 and a decline to 39.85.

 

The current fundamental outlook is neutral. We would consider both longs and shorts from the borders of the flat 40.75-41.55.

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