Crude oil prices have been range-bound over the last few days due to a relative balance of bearish and bullish factors. Despite the current consolidation, there is a downside slope in Brent which may be a sign of buyers’ fatigue and a prelude to a local bearish correction.
Since peak of $70.35 in mid-January, Brent started a smooth retreat and slipped to the $68.02 low yesterday. Prices lack momentum to regain the $69 mark that prevents it from recovery above the key $70 handle.
Among the bullish drivers are raising hopes of increasing global oil demand on the back of a rosy economic picture, a weak greenback, high discipline among OPEC+ members, as well as an expected another weekly drawdown in U.S. stockpiles.
On the other hand, investors are wary of increasing crude oil production in the U.S. as higher prices may, at some point, trigger a new wave of shale revolution. These fears will hardly allow prices to rise significantly from current levels. And the longer prices stays under $69, the higher the downside risk is.
By Helen Rush
Senior Analyst at Capital Markets