Crude Oil Forecast – Crude Takes Pause After SlideOil prices have settled down after starting the week with losses of close to 4 percent. Still, crude prices remain under pressure, as the coronavirus remains unchecked and it is uncertain if OPEC will be able to lower production.
Are OPEC and Russia Parting Ways?
The China coronavirus has caused havoc in China’s economy and is threatening the global economy as well. China is the world’s number two consumer of oil, so it’s no surprise that demand has plunged, resulting in crude prices falling heavily early in 2020. This has left oil producers with a major headache, as they face falling oil revenues. OPEC has proposed cutting production in order to shore up sagging demand, but not without Russia onboard.
However, Russia, who has increased production year after year, is clearly hesitant to cut production. A showdown between OPEC and Russia could occur when oil ministers from OPEC and non-OPEC meet on March 5-6 in Vienna. Although Saudi Arabia has denied there is a rift with Russia, most analysts aren’t buying it. According to Manish Raj, chief financial officer at Velandera Energy, “the tussle between OPEC and Russia raises substantial doubt about continuation of production cuts and therefore a return to a heavily oversupplied market.”
Bottom line? I expect to see some intense jockeying between OPEC and Russia in the days ahead of the upcoming meeting. If Saudi Arabia is able to drag Russia on board the proposal to cut output, we could see a sharp rebound in crude prices.
WTI/USD is hovering around the 50.90 level, which was tested in support on Monday and again in the European session on Tuesday. Below, there is strong support just below the symbolic 50-level, at 49.50. This is followed by support at 47.50. On the upside, there is resistance at 52.50, followed by resistance at 54.00. The 50-day EMA is situated at 54.56.