The OPEC+ are debating the options they have at their disposal for oil policies from May and beyond. Thanks to the fresh round of virus infections across some important regions of the world and the extension of lockdowns in part of Europe, it looks like the only options are a rollover of existing cuts in May and followed by a gradual increase in production thereafter. This outcome is likely to have been priced in. However, there could be surprises, such a potential production hike. If they do hike production in May, however small it might be, this will come as a surprise to the markets and oil prices should drop.
So, whichever way you look at it, the risks are skewed to the downside, as a rollover is expected. Thus, any potential oil price gains are likely to be limited. Still, let’s see if the OPEC+ will deliver a surprise later on in the day.
Ahead of the OPEC+ decision, crude oil prices rebounded this morning after falling in the previous two sessions. However, with prices already forming a series of lower highs and a couple of lower lows since topping out in early March, the short-term path of least resistance is to the downside and will remain that way unless Brent oil breaks its bear trend on a daily closing basis:
Source: ThinkMarkets and TradingView.com
Short-term support is seen around $62.40. A decisive move below this level could trigger fresh selling in the days to come, possibly taking us back down to the $60 handle or even lower. Meanwhile the next resistance above $64.50 is seen around the $66.80 to $67.00 area.
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