On Tuesday, the oil market is trading in the green zone, recovering from sharp losses due to the outbreak of coronavirus and the uncertainty associated with the price war between Saudi Arabia and Russia.
Despite local growth, opportunities for further market recovery remain limited. Airlines are reducing the number of daily flights amid a growing number of countries that have announced quarantine to fight the new coronavirus. This will inevitably lead to a reduction in aviation fuel consumption.
Oil problems are exacerbated by the ongoing price war between Saudi Arabia and Russia, two of the world's largest oil producers. On Monday, the head of Saudi Aramco confirmed plans to increase production to 12 million barrels in April.
One of the representatives of HIS Markit stated that a further increase in production in a downturn of the global economy could lead to the largest excess of crude oil in history. Under these conditions, the market may continue to decline.
Regarding the chart, it is worth paying attention to the level of 30.30. Bulls are increasing upward pressure. If this level is broken, the next target for corrective movement will be the level of 31.50.
· Resistance levels: 31.30, 31.50, 33.75.
· Support levels: 28.75, 27.00, 26.00.
The main scenario is a breakdown of resistance at the level of 30.30 and an increase towards 31.50.
An alternative scenario - a decline from current levels towards 27.00.
The fundamental outlook is negative. We consider shorts when prices rise to 31.50.