Raging COVID-19 Weigh on Oil Prices

At the time of drafting this report, Brent crude the British-based contract broke below its critical support level of $65 a barrel amid significant selling pressures with the U.S dollar firm further complicated the bull’s resolve in fighting back. Also, the West Texas Intermediate futures lost about 0.50% to trade slightly lower than $61 a barrel.

Oil bears are currently being rattled by the most recent energy report coming from the world’s most powerful economy, posting a surprise surge of 594,000 barrels for the week ending April 16 as released by the U.S. Energy Information Administration. Energy experts had earlier anticipated a drop of about 3 million barrels when considering a plunge of 5.9-million-barrel was reported last week.

Such macros left oil bulls in disarray with key markets like India the world’s third-largest oil importer, posting another record number of COVID-19 cases, and Japan, the world’s third-largest economy, reportedly considered imposing a state of emergency due to rising COVID-19 cases.

In addition, recent price patterns point to the bears holding sway and the bulls remaining more vulnerable in the coming days as price broke a key support zone. From an oil trader’s perspective, a good region to reduce bullish bets for a possible bearish run ahead of the rebounding dollar seems to be around the $63.50- $64.50 support area as such a breach lower might hint at a change of narrative.

That being said, the global energy consumption for crude oil currently stands at about 3.5 million barrels a day far below pre- COVID-19 pandemic levels, energy experts further predict global energy consumption slamming the roof later this year with COVID-19 vaccines hitting key international markets at record levels and major economies like the United States and China looking fired up, it’s very unlikely for oil prices to fall below the $55 a barrel levels this quarter.