Brent crude could challenge the $70 psychological level for the first time since early December

Oil prices keep struggling to regain a steady upside momentum these days while staying below the descending 20-DMA. On Wednesday, Brent crude is oscillating around more than one-week lows in the $72.60 area, staying on the defensive ahead of the Federal Reserve decision due later today.

The bank is widely expected to accelerate the end of its bond-buying program and thus push the dollar higher across the board. In this scenario, oil prices would edge lower and could even challenge the $70 psychological level for the first time since early December.

Also on the negative side, the ongoing pandemic keeps clouding the outlook for global energy demand. Of note, the International Energy Agency said a surge in coronavirus cases with the emergence of the Omicron variant will dent global demand for oil, especially in the United States. Meanwhile, the World Health Organization said the Omicron variant was spreading at an unprecedented rate. Against this backdrop, governments around the world have announced tighter restrictions to stop the spread of Omicron. Furthermore, the Asian Development Bank trimmed its growth forecasts for developing Asia, citing uncertainty brought on by the variant. 

In other news, the API report showed overnight that US crude oil stockpiles contracted by just 815,000 barrels last week versus -2.6 million barrels expected. The data had little to no impact on the market ahead of the EIA report due later today. 

The technical picture shows the least path of resistance is to the downside for Brent, with bullish attempts attracting sellers. As such, a break below the mentioned support zone would pave the way to the $71 figure, followed by $70. On the upside, the immediate resistance arrives at $74.30, followed by the $75 figure where the 20-DMA lies. 


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