Crude oil is on the rebound after suffering heavy losses across the previous week. After shedding 16% in its worst weekly decline in 11 years, oil was rebounding in early trade on Monday, up 2.7% on optimism of central bank stimulus in the face of risks posed by coronavirus and deeper OPEC cuts.
Global central bank policy action
On Friday Fed Chair Powell hinted at more easing as the Fed stands prepared to take action should the US economy need additional support. The BoJ reassured on coronavirus and the BoE also joined the growing chorus of central bankers promising action to ease the economic impact of the coronavirus. Central bank support propping up economies could curb the crippling impact that the coronavirus outbreak could otherwise have on future oil demand.
OPEC cuts?
Oil traders are now looking ahead to this week’s OPEC meeting, which begins on Thursday to see what response the group will give amid fears that the coronavirus outbreak could cripple future demand.
Expectations are that the group could sign up to an additional 1 million barrel cut per day, significantly more than cuts provisionally discussed when the group agreed to convene, which is helping to boost the price of oil.
The plan is for Saudi Arabia to absorb the bulk of the cuts, whilst Kuwait, United Arab Emirates and Russia would split the rest. OPEC are keen to show that they capable of responding to a sharp drop in demand. However, Russia isn’t fully onboard, as the full extent of the coronavirus impact remains unknown.
Levels to watch
After last week’s 16% drop, WTI is up 2.7%. Whilst it trades firmly below its 50, 100 and 200 sma on the daily chart, it is also in overbought territory on the RSI meaning that a push higher could be on the cards.
Immediate resistance can be seen at $46.70 (today’s high) before $48.75 (high 27th Feb) and $50 (round number).
Support can be seen at $46.06 (today’s low) prior to $42.60 (low 26th December).
