Fundamental analytics

Oil prices decline after API reserves data release

WTI

Oil prices are falling after the release of disappointing API data on reserves. The market is increasingly concerned about oversupply due to the recovery in production in the US and some OPEC countries and the slowdown in economic activity in many regions due to the worsening epidemiological situation.

 

According to the API report for the reporting week, oil reserves increased by almost 0.6 million barrels. Experts had expected a decline of 1.9 million barrels.

 

OPEC's further plans to increase production in early 2021 are of significant market concern. The current production limitation agreement is valid until the end of December 2020. While the OPEC countries do not intend to extend the current restrictive measures. Russian energy minister stated yesterday that it was too early to discuss the future of the OPEC + agreement. There are several months before the final meeting of OPEC +. The participating countries will carefully study the changes in the market situation and only then make a decision on the current agreement.

 

EIA data on reserves will be published in the US today. It is expected to reduce the level of oil reserves by 1.021 million barrels.

 

A strong reversal signal has formed on the chart. Buyers broke through, but could not keep the price above 41.60. Today we expect a decline in the direction of the 40.50 level.

 

· Resistance levels: 41.60, 42.10, 42.80.

 

· Support levels: 40.50, 39.60, 38.65.

 

The main scenario - a decline to 40.50.

 

An alternative scenario - a breakdown of resistance at 41.60 and an increase to 42.10.

 

The current fundamental outlook is moderately negative. We consider shorts from the level of 41.60.

 

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