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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.”