- Members of OPEC+ have agreed to small production increases in the new year
Analysts expect oil prices to rise in the coming months
If the price jumps above 50 dollars, the next target could be around 55 dollars
While crude oil continues to be supported by vaccine hopes, rising Covid 19 cases and new restrictive measures could significantly reduce oil demand. The price of crude oil rose to over $46 in November this year and the current price is around $45.
Analysis: OPEC will allow a 500,000 bpd increase in production from January
The U.S. Food and Drug Administration is expected to approve the coronavirus vaccine by mid-December, which could further support the price of oil. Pfizer applied for approval of the vaccine and the Company announced that it could begin marketing the vaccine in the United States by the end of December.
Nevertheless, the U.S. again reported more than 200,000 new cases in one day and hospitalizations in the U.S. reached record levels. Travel restrictions and closures have already drastically reduced the demand for oil and kept prices low as global stocks remain high.
The new restrictive measures could reduce the demand for oil even further, and for this reason we can conclude that there is still no clear trend in oil prices. Libya has increased its oil production to 1.2 million barrels per day and OPEC+ members have agreed to small increases in production in the new year.
OPEC will allow an increase in production of 500,000 bpd from January, hoping that a vaccine will significantly increase demand.
“This is a relatively small increase compared to the 9.7 million barrel reduction. Expectations for oil demand are rising and despite new curbs, there is hope that a vaccine will significantly increase demand in the second half of 2021,” said Phil Flynn of Price Futures Group.
Technical analysis: There is still no clear trend in oil prices
Data source: tradingview.com
The price of crude oil continues to trade above the support level of USD 45, and analysts expect oil prices to rise (a slow but steady increase) in the coming months. The main support levels are $45 and $40; $50 and $55 represent resistance levels.
If the price jumps above $50, it would be a signal to buy oil and we have the open path to $55. If the price falls below $40 on the other side, it would be a clear “sell” signal and we have the open path to $35.
Crude oil prices remain above the $45 mark, supported by news that the U.S. Food and Drug Administration (FDA) is expected to approve the coronavirus vaccine by mid-December. OPEC+ members have agreed to a small increase in production in the new year in the hope that a vaccine will significantly increase demand. If the price jumps above $50, the next target could be around $55, but if the price drops below $40, this would be a strong “sell” signal.