Oil prices edged up in early Asian trading on Friday benefiting from positive technical price momentum, but analysts said it was too early for a trend reversal of steep recent price falls as structural oversupply remains in place.
While the fundamental outlook for oil remains bearish due to oversupply, technical price indicators seem to allow space for some short-term price increases.
“Brent oil may break a resistance at $48.80 per barrel and rise more to $49.53, as indicated by its wave pattern and a Fibonacci projection analysis,’’ said Wang Tao, Reuters market analyst for commodities and energy technicals.
“Support is at $47.51, the 61.8 per cent Fibonacci retracement on the rise from $45.59 to $50.62, a break below which will lead to a further loss to $46.78, the 76.4 per cent retracement,’’ he added.
Benchmark Brent crude futures were trading at $48.47 per barrel at 0206 GMT, up 20 cents since their last settlement. US crude was trading at $46.55 a barrel, up 30 cents.
Swiss move to abandon currency cap
Despite the slight price gains, oil opened up into a wobbly market after Switzerland’s unexpected move on Thursday to abandon its currency cap jolted markets already roiled by plunging commodities prices, triggering the euro’s biggest one-day drop fall against the Swiss franc in history and an 11-year low against the US dollar.
Investors took this as a sign that the European Central Bank would launch large-scale bond buying next week, as many had already expected.
Crude oil oversupply
The overall situation in oil markets remains dominated by oversupply, created by soaring US shale output as well as high production from OPEC members, as well as Russia.
“We believe OPEC is playing a long game by creating a lower oil price environment that will lead to cancellation/postponement of investment in non-OPEC countries outside the US,’’ French bank BNP Paribas said in an overnight statement.