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Oil prices decline due to worsening epidemiological situation in China

Prices for Brent and WTI crude oil fell by more than 1% on Monday due to heightened concerns about global fuel demand amid tight quarantine restrictions in Europe and new travel restrictions in China, where the number of infected has risen sharply.

 

The epidemiological situation in Asian countries has deteriorated sharply. Now the focus is on news from China, where strict quarantine measures have been introduced in Hubei province. Some 11 million people are isolated. The Chinese authorities said that this region has seen the maximum daily increase in infected people in the past 5 months.

 

Strict quarantine measures remain in most European countries. Countries are extending quarantine measures until at least the middle of next month.

 

The difficult epidemiological situation in Europe and Asia has again highlighted the problem of energy demand. Last week, Saudi Arabia announced a reduction in oil production by 1 million barrels. In February-March, but now many investors believe that this will not be enough to maintain the balance of the energy market in the face of the introduction of new restrictions on movement.

 

On the chart, the price tested the 52.70 level, from which a pullback movement develops. Now it is worth paying special attention to the level of 51.30. If buyers keep the price above this mark, the price may resume its upward movement towards the main medium-term target at 54.00. In case of a breakdown of the level of 51.30, we expect the quotes to decline to 50.00.

 

  • Resistance levels: 52.70, 54.00, 55.00.

 

  • Support levels: 51.30, 50.00, 49.50.

 

The main scenario is a decline to 51.30 and a renewed upward movement.

 

An alternative scenario is a breakdown of support at 51.30 and a decline to 50.00.

 

The current fundamental outlook is moderately negative. We consider longs around the level of 51.30.

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