Oil Collapsing on Fears of Weak Demand and Illiquid Markets
Joe Perry March 18, 2020 5:48 PM
The price of West Texas Intermediate Crude Oil (WTI) is crashing to levels not seen since January of 2002, in the wake of the turmoil after 9/11. As my colleague Matt had written yesterday, WTI had a good chance of reaching support near 25.00. This was due to the largest demand shock in history, Russia and Saudi Arabia ramping up output, and a surging US Dollar. Price today not only took out the 25.00 level, but his exceeded that target by over $3.00, trading below the $21 handle to a low of $20.34 at the time of this writing. Price is down over 21% today alone. In the month of March to date, price of WTI Crude oil is down over 51%!
Source: Tradingview, FOREX.com
The next level of support is the psychological round number of $20.00, then horizontal support from late 2001/early 2002 early $16.70. Given the nature and amount of the selloff today, its difficult to find any meaningful near-term resistance. The first horizontal level is yesterday’s lows near 26.59, then the lows from March 9th at 27.31. This was the Monday after Saudi Arabia challenged Russia on supply output, saying they would pump as much oil as possible. As one would expect, the RSI is oversold and diverging from price on the daily timeframe and should be ignored for the time being, as the oscillator has been in oversold territory since March 9th and price continues to move lower.
Source: Tradingview, FOREX.com
If one wishes to get involved in trading to WTI, please make sure to take small positions and use stops. Preservation of your trading account is paramount, and in these volatile markets, price can move against traders very quickly!
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.