Traders should have enjoyed the historic drama staged by the oil market overnight.The May contract for West Texas Intermediate (WTI) futures collapsed to zero before ending the session at minus-$37.63 a barrel, meaning producers have to pay buyers to take oil away or store it. This is the first time in recorded history that crude has dropped into negative territory, far surpassing the 1986 low of $10.20 a barrel.
Amid the prevailing coronavirus pandemic, traveling is banned, businesses are closed, and billions of people are requested to stay at home -- as a result -- a deep global recession is expected.
And in turn, global oil demand is wiped out, and physical oil prices accelerate to the downside.
The May WTI contract expires today. Typically the front month converges with physical prices as it nears expiry. And we saw negative prices overnight.
Then, how about the June WTI contract, which becomes the "front month contract"?
Source: GAIN Capital, TradingView
As long as the pandemic-induced bearish economic fundamentals persist, global oil demand cannot regain "normal" levels, and oil prices could hardly show any potential for a rebound.
As shown on the June WTI contract's 30-minute chart, a bearish intraday bias has been well maintained by the descending 50-period moving average.
Price has returned to levels below the 20-period moving average.
Key resistance is encountered at $22.55, while downside support is expected at $20.20 (around the low of yesterday) and in extension, $19.50.
Viewing the matter in another angle, in case crude oil prices keep slumping, it is a sign of continued distress in the U.S. and global economy.