Oil enters the trading week in the red zone due to fears associated with an increase in the number of cases of COVID-19. Many regions are tightening restrictive measures, which will have a restraining effect on the pace of global economic recovery and energy demand.
In the United States, there has been a significant surge in virus infections. Many states reported a record number of infected per day. Only two states, Connecticut and Rhode Island, reported a decrease in the number of new cases compared to last week.
The epidemiological situation in Asia remains difficult. In recent days, there has been a sharp increase in infections in Indonesia, the Philippines and India.
New outbreaks have been reported in Australia and New Zealand.
In addition to the risks associated with the onset of the second wave of the coronavirus pandemic, there are other factors on the market that severely limit the potential for rising oil prices. These include a low level of processing margin, a high level of reserves and the resumption of shale production in the United States.
Regarding the chart, bearish signals prevail locally. The price is constrained in the range of 37.00-38.50. The pressure on the lower end of the range is gradually increasing. We are expecting a breakdown and a downward movement to 34.50.
· Resistance levels: 38.50, 39.75, 41.10.
· Support levels: 37.00, 34.50, 31.50.
The main scenario - a breakdown of support at 37.00 and a decrease to 34.50.
An alternative scenario - a consolidation in the range of 37.00-38.50.
The current fundamental outlook is moderately negative. We would consider shorts from the level of 38.50.