Crude oil price closed the week almost 9% higher
Libya could potentially return up to 1.1 million barrels per day of delivery to the market
International Energy Agency (IEA) lowered its forecast for the demand for oil for 2020
Saudi Arabia’s energy minister said that those who bet on prices will be hurt “like hell
The price of crude oil has risen from $37 to $42 in less than a few days, and the current price is around $41. At its last meeting, OPEC agreed to extend the compensation period for overproduction until the end of December.
Fundamental analysis: IEA has lowered its forecast for oil demand in 2020
The price of crude oil rose last week despite the fact that Libyan warlord General Khalifa Haftar said the country would reopen the oil ports that had been closed since January. Libya could return up to 1.1 million barrels per production day, although the International Energy Agency (IEA) has lowered its demand forecast for 2020.
Last week, Saudi Energy Minister Prince Abdulaziz bin Salman sent a message to the short sellers who are betting against OPEC’s determination: “Make my day! The Saudi Arabian Energy Minister also said that those who bet on prices will be hurt “like hell”.
He did not want to comment on OPEC’s short-term plans and warned the countries bypassing the production cuts. The Organization of Petroleum Exporting Countries agreed that the production cuts will remain in place until December, and this will ultimately drive the market in the coming period.
The EIA predicts that global oil demand will be 93.1 million b/d in 2020, a decline of 8.3 million b/d from 2019. It predicts that demand will increase by 6.5 million b/d in 2021, and the price will also rise. The US dollar also has a major impact on commodities, and investors in oil should also have this currency on their “watch list”.
The good news is that analysts remain “bullish” on oil and most of them expect oil prices to rise in the coming months (a slow but steady increase in prices). For the second half of 2021, analysts expect prices to continue to rise at a similar rate (they also expect oil demand to continue to grow).
Technical analysis: Bears focus on breaching the current support level at USD 40
The price of crude oil continues to be on an upward trend and it is expected that investors trading in oil will be more active in the coming weeks. The technical picture suggests that the price has found a support level at $40, but is it ready for further growth? Let’s take a closer look at the chart below.
Data source: tradingview.com
On this diagram I have marked important resistance and support levels. The important support levels are $40 and $35, $45 and $50 represent the resistance levels. If the price jumps above $45 it would be a “buy” signal and we have the open path to $50.
A rise above $50 supports the continuation of the uptrend and the next price target could be around $55. If the price on the other side falls below the $40 level, this would be a “sell” signal and we have the open path to $35.
Summary
Crude oil prices closed the week almost 9% higher, but estimates suggest that demand for “black gold” is likely to decline somewhat more than previously thought. Libya could return up to 1.2 million barrels per production day, although the International Energy Agency (IEA) has lowered its demand forecast for 2020. The coronavirus crisis has reduced global oil demand and OPEC has decided to limit production until December. The bears are focusing on breaking through the current support level of $40, but if the price jumps above $45, it would be a “buy” signal and we have the open road to $50.
