A slowdown in China’s February factory activity growth capped gains in the market
Following a solid bearish correction, oil prices rose on Monday, regaining the $65 handle at the open. During the early European hours, Brent crude was holding around $65.55 while struggling to reclaim the $66 level as support. Despite the futures lack the upside momentum, the overall picture in the market still looks upbeat, with progress on the US stimulus bill adding to investor optimism.
In particular, the U.S. House of Representatives passed a $1.9-trillion relief package over the weekend. Now, it goes to the Senate for approval. Furthermore, the newly approved Johnson & Johnson COVID-19 vaccine should start on Tuesday after the regulator voted on Sunday to recommend its COVID-19 shot for widespread use.
On the negative side, a slowdown in China’s February factory activity growth capped gains in the oil market as activity growth slipped to a nine-month low.
Now, the market focus shifts to the upcoming OPEC+ meeting due on Thursday. It is possible that the alliance will discuss increasing production against the backdrop of the recent rally in prices. If the combined increase does not exceed 500,000-600,000 barrels per day, that won’t hurt prices. The producers will likely be careful and refrain from releasing too much volume back into the market in order to avoid a substantial decline in prices.
From the technical point of view, there is scope for another bull run in the short term as the overall trend remains bullish amid the improving outlook for economic recovery globally. Brent crude could regain the $66 handle following some hesitation if the OPEC+ meeting doesn’t disappoint. Should this level turn into support, the recent highs around $66.80 will come back into market focus. On the downside, the $63.45 area represents the key support ahead of the 20-DMA, today at $62.50. As long as the prices stay above this level, downside risks remain limited.