The number of global cases surged past 38 million as of October 14
Oil prices reversed previous losses on Tuesday and resumed the recovery after some hesitation earlier today. However, it looks like Brent lacks upside momentum to see a more sustainable and robust ascent amid the lingering concerns over weak demand coupled with rising supply as well as other COVID-related risks.
As risk sentiment looks subdued, the futures will likely struggle to stage more gains in the short term. Overnight, Wall Street stocks retraced from their recent gains despite upbeat US corporate earnings as investors express worries amid a lack of progress on US stimulus talks.
On Tuesday, the market derived some support from strong economic data out of China. Chinese total imports unexpectedly surged 13.2% in September, pointing to stronger-than-expected domestic demand. Chinese oil imports rose 2.1% to 48.48 million barrels from 47.48 million barrels in August. On the negative side, the OPEC said in its monthly report on Tuesday that oil demand in 2021 will rise by 6.54 million barrels per day to 96.84 million barrels per day, 80,000 barrels per day less than its forecast a month ago.
However, in a wider picture, the ongoing coronavirus pandemic continues to dent oil market sentiment, with rising cases threatening the already fragile economic recovery and demand outlook. According to the latest data from Johns Hopkins University data, the number of global COVID-19 cases surged past 38 million as of October 14.
From the technical point of view, the risk of a decline below $40 persists despite Brent is holding above $42 currently. Now, the futures are stuck between the key moving averages, struggling for direction amid lower volatility in the global financial markets. Despite the neutral dynamics at this stage, the path of least resistance remains to the downside. In the immediate term, Brent needs to stay above the $42 handle in order to avoid another sell-off. On the upside, the nearest resistance arrives at $42.60-$42.70.