Crude Oil Price: Further Ascent Faces Headwinds Despite Risk-On Sentiment

Summary:

Crude oil prices on the Brent crude benchmark could face significant headwinds soon as OPEC + gears up to ramp up production.

Brent crude oil price looks set to end the week with gains of at least 6% as GDP recovery in China and positive data from the US boost economic recovery sentiment. Also helping push crude oil prices this week are the upward revisions of global demand forecasts from the International Energy Agency (IEA) and OPEC.

However, the prospect for further upside on crude oil prices as from next week is starting to look slimmer, as the daily chart begins to show signs of waning bullish momentum. Furthermore, comments by Russian Deputy Prime Minister Alexander Novak, who held the energy ministry portfolio until 2020, may point to lower prices as he notes the gradual increase in production quota from the OPEC + alliance.

Novak was quoted by Reuters via the Interfax news agency on Friday as saying that the OPEC + producers would gradually restore oil output in May and July, as agreed in the last meeting of the alliance. This factor remains the major fundamental influence on crude oil prices and could hinder a push towards $70.

Brent crude is currently trading at $66.86.

Technical Outlook for Brent Crude

The daily chart shows that the active candle has formed a doji at the 66.81 resistance level. This is also the site of the upper edge of the bearish flag consolidation area. The odds favour a downside move from this level, targeting 65.95 initially, followed by a move towards 64.26 and 62.21, as the bears target a potential breakdown of the flag. This breakdown has 57.47 as the price projection point for the measured move, which could also allow the bears to take out 60.07 as well.

On the other hand, a break of the 66.81 resistance invalidates the pattern, allowing bulls to aim for upside targets at 67.74 and the 70.01 psychological resistance level.