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The oil market starts new trading week in the red zone

Oil prices fell on Monday due to fears of oversupply.

 

OPEC + countries should increase production in August by about 1.5 million barrels per day, while new restrictive measures related to COVID-19 in the United States and other countries indicate a slowdown in fuel demand growth.

 

California experienced a rise in COVID-19 cases above the two-week average on Sunday, according to the latest data. A difficult epidemiological situation is observed in other states. Due to quarantine measures, analysts record a decrease in fuel demand in the United States.

 

Also, many experts talk about a possible increase in shale oil production in the United States against the background of stabilization of oil prices above $ 40 per barrel. This could lead to an increase in oil reserves and an increase in the imbalance towards excess supply.

 

Today in the economic calendar it is worth paying attention to the publication of PMI data for manufacturing sectors in the EU and the US. The data above the forecast could increase investor risk appetite and contribute to the recovery of oil prices, as production growth will indicate an increase in energy consumption.

 

The chart is dominated by bearish signals. The price consolidated below 40.75, therefore, we would consider the scenario with a decline in quotations towards the 38.70 level as a priority.

 

  • Resistance levels: 40.75, 41.75, 42.30.

 

  • Support levels: 38.70, 37.00, 34.50.

 

The main scenario - a decline to 38.70.

 

An alternative scenario - a breakdown of the resistance at 40.75 and growth to 41.75.

 

The current fundamental outlook is moderately negative. We would consider shorts from the level of 40.75.

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