Brent Crude Oil Calm Ahead of US Oil Rig Count Data
Crude oil price on Brent and the WTI varieties extended their steep slides on the week as Coronavirus-induced risk-off sentiment dominated Friday afternoon trading. The selloff deepened as the scope of the outbreak widened, prompting the WHO to announce the coronavirus outbreak as a global health concern.
Brent crude oil price slid to $56.96, where it is now flirting with the support line at $57.47 in a possible breakdown showdown. However, the downside seems limited at the moment, thanks to a report just released that shows that the crude oil output of the Organization of the Petroleum Exporting Countries (OPEC) dropped by 640,000 BPD in January 2020 to 28.35m BPD. The output drop comes as a result of the December agreement between OPEC and its allies to cut production as from Jan 1.
Read our Best Trading Ideas for 2020.
The weekly candle has to close below the 57.47 support with penetration of at least 3% to confirm the breakdown of the support, which then clears the path for crude oil price on the Brent variety to target the next support level at 55.59. 53.26 and 50.64 (close to 2019’s lowest price area) remain further support levels which may come into focus if risk-off sentiment on risky assets such as crude oil remains.
On the flip side, failure to close below the 57.47 support with the appropriate time/price filters could allow for a transient recovery to 58.69 and 60.26. The 63.71 previous support which also housed the channel’s lower border continues to remain a potential target to the upside but requires a robust recovery to become relevant in the short-term.