Brent Crude Oil is actively losing value, reaching 90.95 at today's auction, against the background of the strengthening of the USD and the increase in the incidence of COVID-19 in China.
The increase in quotations last week can be explained by the fact that the National Health Commission of China has adjusted its measures for the prevention and control of COVID-19. The quarantine time for those who were in close contact with the sick and for arriving travelers was reduced from 7 to 5 days. Investors took this news positively, hoping for a speedy recovery of the Chinese economy, but over the weekend the number of cases of coronavirus infection in Beijing and a number of other major cities again updated records, raising fears of a decline in demand for hydrocarbons from its leading global importer. To contain the spread of infection, the authorities are likely to return to strict quarantine restrictions, so China will not be a source of support for "bullish" oil sentiment in the near future.
The second factor affecting the dynamics of energy quotes is the correction of the US currency, which restored positions in pairs with the euro and the yen. A more expensive dollar makes the goods denominated in it expensive for non-US buyers and puts pressure on oil prices and other risky assets.
At the same time, OPEC lowered its forecast for the growth of demand for "black gold" this year and next: in 2022 it will grow by 2.55M barrels per day or 2.6%, which is 100.0K barrels lower than the previous forecast. The organization assumes that the global economy has entered a period of significant uncertainty, and predicts that the risks will increase in Q4 2022.
In general, in the long term, the price of oil is likely to decline.
The long-term trend remains descending. After an unsuccessful attempt to break out the key resistance of 99.10 last week, the price dropped to the level of 93.50, if it is overcome, the fall is likely to continue with a target at 88.50.
The mid-term trend is upward. After reaching the target zone 2 (101.27–100.42), the price corrected to the key support area 93.20–92.45. If it is held, then we can assume another wave of growth in order to update the maximum on November 7 in the area of the target zone 2. If the level of 92.45 is broken down and the price consolidates below, the mid-term trend will change to a downward one. In this case, it will be possible to consider sales with a target in the area of 85.70–84.95.
Resistance levels: 99.10, 104.00, 110.00. | Support levels: 93.50, 88.50, 83.50.