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Oil prices are rising despite negative fundamental background

On Monday, oil prices show positive momentum despite disappointing reports of an increase in the number of cases of COVID-19. In the United States, the number of infected people exceeded 25 million. In the world, the number of infected people is approaching 100 million.

 

The main support factor now is the dynamics of the dollar. The dollar index sank by 0.15%, supporting all commodity assets that are denominated in the US currency.

 

Despite the local growth, the prospects for further development of the upward movement remain very limited. The market is increasingly concerned about the demand for energy as more and more countries tighten or extend quarantine measures. There were reports today that the French authorities may extend the nationwide lockdown. New restrictions were introduced in Hong Kong and other regions of China. All of these messages cloud the prospects for energy demand.

 

Industry data from the US will also have a negative impact on the market. On Friday, the EIA reported a 4.4 million barrels increase in inventories, and Baker Hughes data show that the number of US rigs has been growing for the 9th straight week. Although the total number of active rigs is 52% lower than the number of rigs in the same time period in 2020. The market may also be negatively affected by statements by the Iranian Energy Minister, who announced record volumes of oil supplies despite US sanctions.

 

A corrective movement develops on the chart after testing support at 51.30. The closest target for growth is the level of 53.15. At this point, we are waiting for the formation of topping signals and the resumption of downward movement.

 

  • Resistance levels: 53.15, 54.00, 55.00.

 

  • Support levels: 52.00, 51.30, 50.00.

 

The main scenario is an increase to 53.15 and a downward reversal.

 

Alternative scenario - decline to 51.30 from current levels.

 

The current fundamental outlook is moderately negative. We consider shorts on a pullback to 53.15.

 

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