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According to UOB Group’s Global Economics & Markets Research team, prices of the European reference Brent crude are seen facing strong contention in the $22.00 mark per barrel.

Key Quotes

“We highlighted that ‘the Jan 2016 low of $27.10 is a relatively solid support but if Brent were to register a weekly closing below this level, further loss towards the Nov 2001 low of $16.65 would not be surprising’.

“Brent closed at $26.98 at the end of the third week of March (20 Mar) and after a period of volatile price actions, plunged to a low of $15.98 two weeks ago. The recovery from the low was initially tepid but the rebound has since picked up momentum and broke above the 2-1/2 -month declining trend-line resistance a few days ago (see chart above). The breach of the trend-line amid bullish divergence on the daily MACD suggests that $15.98 could be a short-term bottom. In other words, $15.98 may remain intact for up to several weeks, possibly up to a couple of months.”

“At this stage, the advance from the low is viewed as a ‘corrective recovery’ and not the start of a major reversal. That said, in view of the super-sized decline over the past few months, there is room for the rebound to extend higher towards the middle of the ‘trading envelope’ (the current level is at $33.75 but is expected to move lower over time). For now, the April’s peak of $36.40 is likely out of reach. Overall, the outlook for Brent is deemed as ‘mildly positive’ with $22.00 acting as a strong support ahead of $15.98.”