The last time Brent fell below $50 a barrel was in July 2017. As the markets continue to sell risk assets and while the fundamentals have been terrible for oil, the move lower may be overdone. Oil is now lower by 40% from the 4-year high in October and after the Christmas Eve crash, we could see a key bottom in place.
The backdrop for lower oil prices remains slower growth and surging US supply will lead to a surplus. Overnight, Russian Energy Minister Novak reiterated the OPEC and allies viewpoint that they see a more stable oil market in H1. He noted that OPEC+ planned meeting will take place in April, but the agreement allows to meet at any moment if a quick response is needed. Expectations are growing for OPEC to convene an extraordinary meeting if we see another major wave of selling. Another $5 to $10 lower with oil prices would start making Russia and US shale producers uncomfortable.
The Canadian dollar is also attempting to rebound here and could have its first consecutive days of strength against the greenback since December 12th.
Price action on the Brent crude daily chart shows that price is tentatively forming a bullish ABCD pattern. If valid, we could see a rebound towards the $55.00 level. Key resistance may come from the $57.50 level. If the pattern is invalidated, initial support may come from the $47.50 level. Major support would lie at the $45.00 level.
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