Crude oil prices have resumed their ascent on Tuesday after mild losses overnight. Brent extended gains to fresh March highs around the $66.50 area where the barrel has bumped into resistance. Despite the current recovery, the bullish potential remains limited on the back of lingering concerns over the US shale production as well as the persistent risk aversion in the global markets.
The local support for the crude oil market comes from tensions between Saudi Arabia and Iran. The additional bullishness is the result of the latest signals from the joint technical committee of OPEC and non-OPEC producers, who highlighted the upcoming market rebalancing between 2Q and 3Q this year. The group reported further global inventories decrease in February.
Meanwhile, shale producers continue to expand their activity, and the upcoming data from the US will likely signal continuation of this trend, which could derail the current recovery attempts in prices. Another risk event for Brent is the results of the two-day Fed meeting. The potential Powell’s hawkish comments on hiking rates will trigger the greenback’s rally across the board. In this scenario, oil prices will resume the downside move. Therefore, chances of breaking above the $66.80 resistance are low at this stage.
By Helen Rush
Senior Analyst at Capital Markets