Crude oil prices remain close to the multi-month lows on Monday, with buying interest remains limited despite attractive low levels. There are a few bearish factors that prevent the futures from a recovery at this stage. They are the coronavirus concerns, a stronger dollar, de-escalation of tensions surrounding Iran, the elevated activity in the US shale oil fields, uncertainty over the OPEC+ decision, and the general risk aversion. Despite investor sentiment has stabilized somehow, market participants remain cautious as the China virus outbreak continues, driving risky assets lower.
From a peak in January, Brent has declined more than 20% already, as the spread of the virus hit demand in China and made investors worried about the health of the global economy. Against this backdrop, oil prices remain vulnerable and struggle to attract buyers back to the market. The negative pressure also comes from the OPEC-related uncertainty after Russia said it needed more time to make a decision on the recommendation from a technical committee to additionally cut production by 600,000 barrels per day. As such, Moscow’s verdict on the matter will be the next market-mover as the country is set to announce its decision this week.
Separately, oil market struggles to recover as the activity in the US oil fields remains elevated. Production stays at record highs, with a gradual rise in the drilling activity suggesting the output could increase further in the weeks to come. Further rise in crude oil inventories is another risk factor for prices.
In these conditions, at least near-term risks are still skewed to the downside, with traders continuing to closely monitor virus-related developments. Brent may get back below the $54 handle and retarget the recent lows around $53.65. Once below, traders will shift focus to the $53 level should the OPEC+ decision fail to inspire bulls and fresh industry data out of the US point to a further rise in crude oil stockpiles.