A strong sense of anticipation can be felt across oil markets as investors await the outcome of a meeting of ministers from OPEC and Russia.
Will OPEC cap output at current levels for February after deciding to raise production by 500,000 barrels a day in January?
The re-opening of economies across the world and the rollout of vaccines have boosted sentiment towards Oil. However, surging coronavirus cases and lockdown restrictions threaten global energy demand recovery. It must be kept in mind that Germany is likely to prolong stricter lockdowns, Japan is considering another state of emergency while there are whispers over England entering its third national lockdown. Given the conflicting themes influencing Oil prices, the demand outlook for the next few months remains clouded by uncertainty.
Should OPEC and Russia refrain from raising output in February, this may translate into higher oil prices. The meeting could be complicated given how Moscow and the UAE have been keen to release more barrels into the markets. If both sides fail to find a middle ground, this may spell more uncertainty for Oil – leading to further losses.
Looking at the technical picture, Oil prices are down almost 2% today thanks to lockdown fears. WTI Crude is trading around $47.60 as of writing while Brent is marginally below $51.00.
WTI Crude has the potential to decline back towards $43.30 if $50.00 proves to be reliable resistance. Looking at the technical indicators, prices are trading below the 20 Simple Moving Average but the MACD points to further upside.
The same can be said for Brent. A breakdown below $50 could pave the way lower towards $46.00 in the near term. If $50.00 proves to be reliable support, a move towards $56.00 could be on the cards.
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