Crude oil price
The recent surge in crude oil price has many starting to believe that the black gold may have turned a corner this year. 2020 has been a rough year as the coronavirus pandemic blew away demand and consigned sellers to stare at their overflowing oil vats in disbelief.
But the announcement of potential coronavirus vaccines by Pfizer/BioNTech and Moderna Inc seems to have turned the tide. However, MUFG Oil analysts are not very optimistic that Brent crude will stay above $50 by year-end.
Their outlook is guided by what they term as downside risks resulting from a “deeper pullback in global growth” as a result of new coronavirus-related restrictions. So while MUFG oil analysts expect further short-term bullishness ahead of the OPEC + alliance meeting, they are not hopeful of Brent crude oil price sustaining this spike.
I tend to agree. Ending a global pandemic via vaccination is not a piece of cake. Look at how long it took to eliminate smallpox in humans and rinderpest in cattle. Polio is still not gone completely. These are not diseases which can be contracted as quickly as the coronavirus. Even with a vaccine, it may take years to eliminate the coronavirus; that is if that is even achievable.
Furthermore, a vaccine will not automatically translate to an increase in crude oil price demand. Industries across the world would have to ramp up to pre-pandemic levels for a $70 price to become attainable. In a decade, Europe, the UK, US and many parts of the world would have phased out fossil-fuelled vehicles. Aviation may be the only means of transport that would still rely on fossil fuels.
The demand dynamics for crude oil are changing forever. The coronavirus only hastened this phenomenon.
MUFG analysts are projecting a $48/barrel price for Brent crude. What do the charts say?
Today’s downside jeopardizes the time filter confirmation for a breakout above 48.33. The time filter requires two successive daily candles to close above 48.33 to confirm the break and possible push towards the elusive 50.64 price target.
On the flip side, another bearish candle that follows today’s downside negates the breakout. A decline towards 46.41 would now be favoured, with 44.16 and 42.50 serving as additional targets to the south.
