Crude Oil Daily Forecast – Crude Rebounds after Free-fall Plunge

Crude prices have rebounded on Tuesday. Currently, U.S. crude oil is trading at $32.90, up $2.81 or 9.4% on the day. Brent crude oil is trading at $36.50, up $3.98 or 9.5%.

Crude Steadies, But Outlook Remains Bleak

Oil prices have been falling in recent weeks, as the coronavirus has caused economic turmoil in China and has since spread to Europe and the United States. Crude has taken investors on a roller-coaster ride, as a key meeting of oil ministers from OPEC and non-OPEC countries ended without an agreement on Friday. Saudi Arabia had led the push for a cut in output in order to stabilize prices. However, Russia refused to go along with the move, with analysts noting that Russia’s budget had taken into account low oil prices.

Saudi Arabia has responded to Russia’s cold shoulder by launching a price war against Moscow, as it boosted production while cutting prices on the weekend. Crude fell 10% on Friday and plunged a staggering 27% in the Monday session, as prices fell below $28 a barrel, a level not seen since February 2016.

Is the rebound in oil prices on Tuesday just a temporary respite? This could well be the case, as demand for risk assets remains high. Monday’s massive selloff, in which crude went into free-fall, may have been excessive, resulting in gains on Tuesday.

Meanwhile, the situation in Europe is rapidly deteriorating. After closing down the northern provinces, Italian authorities have decided to lock down the entire country in a move to combat the spread of the coronavirus. Italy has reported over 400 fatalities from the virus, which has quickly spread to other Western European countries.

Technical Analysis

Crude has gained ground on Tuesday. The line of 32.80 is providing support, but remains vulnerable. This is followed by support at 29.85. On the upside, we find resistance at 35.50, followed by resistance at 38.00.