WTI Crude Oil Will History Repeat Itself
FOREX.com May 4, 2020 10:33 PM
With oil prices bouncing back to the $20s, the market appears to be calmed down, while U.S. shale oil companies cut production further...
In April, traders were shocked by the fact that WTI crude oil futures plunged into negative figures, amid extreme fears of the coronavirus impacts on oil demand and storage space is running out. In fact, a similar story of an oversupplied oil market can be traced back to the period of 2014-2016, which ultimately led to the first OPEC+ production cut agreement and a rebound in prices.
Despite the fact that the coronavirus crisis dampened the global economy, it does not seems to make sense that someone would get paid for receiving oil. With oil prices bouncing back to the $20s, the market appears to be calmed down.
In reality, there are growing signs of a downtrend in production. Oil field services firm Baker Hughes reported that the number of U.S. oil rigs counts slumped to 325 as of May 1, the lowest level since March 2016 and more than halved compared with the beginning of the year. On Monday, Permian Basin shale oil companies, Diamondback Energy and Centennial Resource Development, announced plans to slash output for May by 10%-15% and 40% respectively.
As the coronavirus crisis appears to be peaked in major countries, a decline in production would certainly aid the recovery in oil prices. Will history repeat itself remains to be seen, though the intraday outlook for WTI crude futures seems appealing.
From a technical point of view, WTI crude futures (June contract) is extending its bullish run as shown on the 30-minute chart. It has broken above a consolidation range after a recent rally. Bullish investors may consider $20.00 as the nearest intraday support, with potential upside targets at $23.30 and $24.80. In an alternative scenario, a break below $20.00 would be a warning that it might be heading back to the next support at $18.00.
Source: TradingView, Gain Capital
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.