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Oil prices decline due to energy demand related concerns

Oil prices are declining on Thursday, despite the fact that yesterday the EIA reported a significant reduction in oil reserves for the reporting week.

 

EIA reported a decrease in oil reserves by 10.6 million barrels, with the forecast of +0.357 million barrels. Such a strong decline in oil reserves came as a surprise to many investors, but this data was almost completely offset by statistics on the growth of reserves of gasoline and distillates. The EIA report shows a very uneven recovery in US energy demand.

 

The oil market continues to be under pressure from reports of an increase in the number of COVID-19 diseases around the world. In the United States, the epidemiological situation remains difficult. In recent days, there has been an increase in the number of cases in Asia, Australia, South America and some European countries. The further spread of the infection may lead to tougher quarantine measures and a decrease in energy demand. At the same time, it’s important to note that the OPEC countries had previously decided to increase quotas for oil production by 2 million barrels per day. The imbalance in the market may again shift towards excessive supply.

 

In general, the market remains highly uncertain. Today, most likely, the key influence on the dynamics of oil prices will be provided by investor sentiments on stock markets. While the main indices show mixed dynamics.

 

The flat of 40.75-41.75 remains relevant on the chart. The priority is the scenario with the price going down from the flat. In this case, we can see a decline in quotations to the 38.70 area.

 

  • Resistance levels: 41.75, 42.30, 43.75.

 

  • Support levels: 40.75, 38.70, 37.00.

 

The main scenario - a consolidation in the range of 40.75-41.75.

 

An alternative scenario - a breakdown of support at 40.75 and a decline in the direction of 38.70.

 

The current fundamental outlook is neutral. We would consider shorts from the level of 41.75.

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