The crude oil price weakened last Wednesday below $64, but since then, it pared losses and closed the week above $65 support. Crude oil slipped after two strong weekly gains, but despite this, crude oil remains in the buy zone.
Fundamental analysis: OPEC forecast a stronger oil demand recovery in the second half of this year
The crude oil price has weakened on a weekly basis despite optimism after a $1.9 trillion recovery package was signed into law. The global business activity is still under pressure, but increasing vaccinations and the prospect that more government spending will drive higher growth keeps the market in a positive mood.
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“Demand for risky assets such as oil continues to be buoyed by the White House relief package and an almost daily flow of optimistic vaccine headlines,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
The 10-year Treasury yield rose to its highest level in more than a year, and some analysts expect inflation to pick up. The rise of treasury yields supports the US dollar, and the strong US dollar may weigh on some liquidity conditions. The US dollar has a big influence on commodities as well, and investors in oil should also have this currency on their “watch list.”
The Organization of the Petroleum Exporting Countries forecast a stronger oil demand recovery in the second half of this year but the global COVID-19 pandemic still continues to pose downside risks to the recovery.
“Oil demand remains on course to grow by 5.8 mb/d to around 96 mb/d while the encouraging global economic developments and resilient demand in Asia are upside factors. Progress on COVID-19 vaccinations continues in many countries, but new global infections rose in the last week of February for the first time in seven weeks,” said Mohammad Sanusi Barkindo, OPEC Secretary-General.
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Technical analysis: Bulls remain in control of the price action
Crude oil has weakened from its monthly highs, and if the price falls below $60, it would be a firm “sell” signal, and the next target could be around $55 support. The first resistance level stands around $68, and if the price jumps above this level, it would be a signal to trade crude oil, and we have the open way to $70.
For now, the positive trend remains intact, and rising above $70 supports the continuation of the bullish trend for crude oil.
Summary
The crude oil price weakened last Wednesday below $64, but since then, it pared losses and closed the week above $65 support. Despite this, crude oil price remains supported by production cuts and optimism about a demand recovery. OPEC forecast a stronger oil demand recovery in the second half of this year, but the global COVID-19 pandemic continues to pose downside risks to the recovery.
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