Brent crude will hardly be able to regain the $65 figure by the end of the trading week
Oil prices plunged to more than one-month lows on Thursday before bouncing slightly by end of the trading day. Brent crude dipped from $68 to $61.45, to finish around $62.75. Today, the prices switched into recovery mode, regaining the $63 figure but the upside potential remains limited after an aggressive sell-off.
The futures dipped amid a combination of rising concerns over rising coronavirus cases in Europe and the strengthening US dollar amid the resurgent rally in bond yields. As a reminder, a number of European countries have halted the use of the AstraZeneca shot because of concerns about possible side effects. Meanwhile, US 10-year Treasury yields rose to fresh more than one-year highs marginally below the 1.7% figure on Thursday before easing marginally. Against this backdrop, risky assets including oil came under severe downside pressure that persists in the global financial markets on Friday. Adding to the negative pressure, US crude inventories rose for the fourth straight week.
Today, the economic calendar docket is empty, so the markets could see some consolidation ahead of the weekend. Brent crude may erase losses further in the short term, as the safe-haven greenback demand has been easing since the opening bell in Europe, with bond yields correcting lower. However, the futures will hardly be able to regain the $65 figure by the end of the trading week, especially as global stocks remain on the defensive for the time being.
From the technical point of view, oil prices need to recover above $64 initially in order to see more gains in the immediate term. In a wider picture, the futures should reclaim the 20-DMA (today at $66.25) as support so that to retarget the $70 psychological level. On the downside, the immediate support is now represented by the $62.30 area where intraday lows arrive.