Brent crude oil price retreat today as the consolidation phase between $41 and $44 continues. The price closed higher yesterday after better than expected manufacturing data from the USA, Europe and China. The U.S. ISM Manufacturing PMI came at 54.2 beating the expectations of 53.6 in July. The New Orders Index registered in at 61.5, topping the expectations of 46.8 in July while the Manufacturing Employment Index came in 44.3 below the estimates of 48.3.
The improvement in manufacturing point to higher demand for crude oil, however, the rising number of coronavirus cases in some countries around the globe might halt the recent economic recovery and reduce the demand for crude oil products.
On the supply side, OPEC will increase the output by 1.5 million barrels a day in August, while some U.S producers will restart production as the inventories drop, and as the price returns to profitable levels.
BP, in its quarterly report, said that it expects global oil demand to be around nine million barrels a day lower than the 2019 levels. The company also warned the pandemic might reduce demand for energy for a sustained period.
The crude oil price is 0.81% lower at $43.50 as the technical picture remains unchanged as the black gold continues the consolidation phase looking for the next catalyst that will drive the price. Traders should be patient and initiate a new trading position to the direction of the breakout when it occurs.
A break above the 200-day SMA at 47.20 might initiate a new leg higher targeting the $50 round figure. Bears can enter a short position if the crude oil price breaks below $41.63 – the 50-day moving average – the next target would be 37.07 the low from June 12.
