WTI: With Trump’s Intervention… Oil May Bottom
Matt Weller, CFA, CMT March 19, 2020 3:06 PM
If traders didn’t already have a reason to wake up and pay attention, maybe this realization will help: We’re currently navigating times that hundreds of future books will be written about.
For market participants, there’s arguably no market more interesting right now than oil. After yesterday’s big drop on fears of weak demand and illiquid markets, prices are surging back a staggering 24% so far today. While oil was already bouncing back strongly along with general risk appetite, so-called “black gold” went vertical this afternoon on rumors that Russian President Putin was willing to engage Saudi Arabia in discussions about cutting production. Astute traders will note that the failure to reach an agreement over production levels led to a huge supply glut hitting the market just as demand collapsing, a perfect storm for crude bears. Hints that the Trump Administration may intervene in the whole kerfuffle have also helped boost prices.
Source: TradingView, GAIN Capital
In any event, WTI is trading back above the key long-term support zone we highlighted near 25.00. Given that the support in this area dates back decades and prices only closed below it for a single day amidst a broader panic and illiquid market conditions, this zone may still continue to put a floor under prices moving forward.
Oil traders will obviously need to a keep an eye on the headlines out of the US, Russia, and Saudi Arabia in the days to come, but the price action and rumors of hints in the fundamental supply/demand situation suggest that oil may have formed at least a near-term bottom yesterday.
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.