Yesterday the price of Brent crude oil broke the main support down at the level of 84 dollars. The price is now at its lowest level since April 2. OPEC+ unexpectedly announced additional production cuts on this day.
A strong GDP forecast in China also did not help oil to keep from falling. It seems that the prospects of weak global demand for oil have a stronger impact on oil prices. Now the most probable scenario is the closing of the gap, which was formed thanks to OPEC+.
Today the market will be influenced by the statistics on initial applications for unemployment compensations. The publication of higher-than-expected data may support the oil market, as it will be a signal for the Fed to ease its policy. However, sentiment about the interest rate worsened after yesterday's high inflation data in the U.K. Considering that the Fed is ignoring signals from the labor market for now, high unemployment applications can have a positive effect only in a small way.
The negative news for oil comes from the refinery industry. In the future, the decrease in demand may intensify due to the upcoming recession. There is no confidence that the growing demand in China and India will be able to cover all the supply in the oil market.
There is a growing mismatch in the market between the expected growth in global demand for oil and the actual decline in refinery margins. This tendency can put pressure on the petroleum products manufacturing in the future. In addition, probably the rise in fuel prices could increase the risks of a recession. Despite this, OPEC and the International Energy Agency (IEA) continue to be bullish in their forecasts of demand for crude oil in the second half of the year.
According to the technical analysis, an important support level, which corresponds to $84, was broken down. A further, most obvious downward target would be the closing of the gap that was created by the additional OPEC+ production cuts. This target corresponds to a price of $80. Stop-loss can be set at the former support level near the price of $84.
Decline of Brent crude oil:
Take profit – 84
Stop-loss – 80
This content is for informational purposes only and is not intended to be investing advice.