The price of crude oil has been rebounding since this Monday after the US House of Representatives passed a $1.9 trillion Covid-19 relief package early last Saturday. However, there are other major fundamentals behind the price of oil’s bullish trend.
On Friday last week, the crude oil price reached $63.82 per barrel – the highest since January – and had been trading on an upward trend, with average daily price movements of around $2.10.
This week, investors will be focusing on this Friday’s US employment report – with the jobless rate expected to have further increased in February – and the results of the OPEC Joint Ministerial Monitoring Committee (JMMC) meetings the day before.
According to forexfactory.com, representatives from the 13 OPEC members and 11 other oil-rich nations will meet to discuss energy markets and – more importantly – agree on how much to produce.
Bank of America also released a statement on Thursday last week expecting an increase in the oil price.
The bank said OPEC+ may decide to now reverse its production cuts, causing the oil price to move above $60 per barrel.
However, it added that a slow return of US shale to international markets may lead to an extension of the production cut agreement to ensure prices remain higher.
Therefore, the outcome of the JMMC meeting is crucial for the future direction of oil prices.
“If the combined [OPEC+] increase does not exceed 500,000 barrels a day, that will be bullish for prices,” said one analyst at Singapore’s OCBC Bank.
The further cutting of production could lift the price to $70 per barrel in the second quarter of this year.
On the technical side, oil prices could be moving in a daily range of between $60 to $63.70 per barrel.
For the trading recommendation, traders should buy oil at $60 per barrel, setting the take-profit function at $63.50 per barrel and the stop-loss function at $57.60 per barrel.
The price of $65 per barrel could be the next target for the oil price to test this week.