During Monday’s trading session oil prices fell by almost 30%, responding to Saudi Arabia’s statements about a $6-8 drop in export prices since April and an increase in production to 10 million barrels per day with future reduction plans of up to 12. These steps are a response to the actions of Russia, which, following the OPEC+ meeting on Friday, announced its withdrawal from the agreement on limiting oil production, which has been in force for more than 3 years.
The price war between Saudi Arabia and Russia can have wide political and economic consequences. The increase in production in the context of a slowdown in the global economy and a decrease in global oil demand will trigger a further decline in energy prices. This will hit the budgets of oil-dependent countries such as Iraq, Nigeria, Azerbaijan, etc. Shale oil producers in the US and Canada will be affected. In addition, the aforementioned changes can also change global politics by destroying the influence of countries such as Saudi Arabia.
Now the market is in a state of shock. Experts note that further escalation of the conflict and dumping of oil prices may provoke a further decline to the lows of the early 2000s.
Regarding the chart, we note the total dominance of sellers. Bidding now takes place below the intraday resistance levels of 31.00 and 32.80, so the priority scenario is with a decline in quotations in the direction of the level of 27.00 and below.
· Resistance levels: 31.00, 32.80, 34.00.
· Support levels: 27.00, 26.00, 25.00.
The main scenario - a decline towards 27.00.
An alternative scenario - a breakdown of intraday resistance at the level of 31.00 and an increase towards 32.80.
The fundamental outlook is negative. We consider shorts from the levels of 31.00 and 32.80.