Oil prices have stabilized somewhat in the second half of the week but sellers remain in control, suggesting more losses may lie ahead. Brent crude failed to confirm a break above $28 and slipped to the $27.50 area on Friday, with a mild bearish slope reemerging in the daily charts. It looks like traders will continue to sell the futures on bullish attempts as market sentiment remains fragile and cautious. 

The main bearish driver for the oil market is the declining global demand amid the coronavirus outbreak. Recession is a real threat now, and considering massive economic consequences from the pandemic, demand will stay weak in the longer run. Against this backdrop, the recent OPEC+ deal will hardly be able to compensate for low consumption globally.

On the other hand, further signs of peaking in virus cases and a gradual reopening of economies could lift prices on hopes for a recovery in economic activity. The question is how long the rehabilitation process will take to return demand to pre-pandemic levels. 

In the near term, gains on the oil markets are also capped by a stronger dollar amid the prevailing risk aversion. Of note, risk sentiment has improved somewhat on Friday but it doesn’t help Brent at this stage. On the downside, a break below the $27.50 support will send the futures to the $27.20 area and then to $27. However, there is still a chance that prices will finish the week above $28 should risk-on tone persist in the coming hours. 

In a wider picture, Brent crude remains in the lower end of the range and continues to threaten multi-year lows as there are too many uncertainties in the industry.

The technical picture could improve marginally if the prices climb back above the $30 handle but traders will need a bullish catalyst to send the barrel higher from the current levels. So far, there are no meaningful signs that could push Brent north.  


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