Oil failed to get back above the 20-DMA earlier in the week, with the selling pressure intensifying on Friday amid a widespread risk aversion that was triggered by a spike in concerns about a new COVID-19 strain that was first identified in South Africa. The news added to worries about a more intense rise in supply surplus next quarter as global fuel demand would ease if the pandemic intensifies again.
Against this backdrop, Brent crude lost over 5% to plunge two-month lows around the $76 figure before bouncing marginally. The market is also weighted by a release of strategic reserves by large consumer nations, including the United States, China, India, and Japan, to cool oil and gas prices. However, according to the latest reports, despite the pressure from Washington to do more, Beijing said it would release its oil reserves according to its needs.
Meanwhile, the US dollar stays elevated amid spiking bets on a rate hike by the Federal Reserve amid stubbornly high inflation and solid economic fundamentals. A powerful rally in the greenback adds to bearish drivers in the oil market these days. Now, the market focus is gradually shifting towards the upcoming OPEC+ meeting due next Thursday. As the latest reports show, the alliance is not considering pausing its current plan to increase oil production by 400,000 barrels per day every month.
Ahead of this major event, volatility could pick up further in the coming days, while virus-related news will affect the prices. The path of least resistance is to the downside at this point, with the next support arriving at $75,65, followed by the $74.50 area. On the upside, Brent crude needs to regain the $80 figure to retarget the mentioned SMA today at $81.60.