Crude oil price suffered a steep decline yesterday, extending losses to the $73 level, -7.5% on the day. On Thursday, Brent makes recovery attempts, with the initial resistance now coming at $75. Despite the sell-off has stopped, prices still look vulnerable as the recovery momentum is too weak so far.
Libya has resumed production earlier than expected, while Saudi Arabia reported a decent jump in output for June, which, coupled with trade war jitters, triggered a free fall in the market and outweighed supply shortage concerns. By the way, the retracement was overdone and too emotional as in the wider picture, the market remains tight and broadly balanced. Moreover, US shale production continues to stagnate, while inventories decline further.
In the short term, Brent needs to regain the $75 figure with the next target at $77. The obstacle for bulls is market worries over the trade war consequences for global oil demand. The rising dollar restrains the buying pressure as well. On the other hand, against the positive fundamental background, Brent looks attractive for opening new longs at current levels.
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