Energy was hard hit by the deluge of bearish news last week, underperforming other commodity assets as Brent plunged 6.8% on the week. Buyers looked reluctant to place bids above $65 and strategists at OCBC Bank expect the cautious tone to hold as we approach the end of Q1 and next week’s OPEC+ meeting.
Key quotes
“Faced with a deluge of bearish factors – a seemingly less-dovish FOMC, setbacks in Europe’s vaccination drive and a fresh spat in US-China relations – oil took a more severe beating than its base metals counterpart. The rise in US Treasury yields to above 1.70% and the firming US dollar also complicated oil’s bull run, while the combined rise in US crude oil and gasoline stocks added another layer of headwind.”
“We have always opined that while crude oil is in need for a technical correction, $65 would be a decent level to begin building a long position again.”
“Last week’s collapse would have flushed out some of the excessive spec longs on the margin, which is vital for oil to continue its upward trend.”
“We think oil could see a slight rebound this week and trade largely range-bound in the medium-term between $65 to $70.”
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