Crude oil heading to $20?

Fawad Razaqzada TradingCandles.com

The price of oil is falling sharply again today after a few days of consolidation. The reason is simple: there is a massive imbalance of historic proportions. Global demand has slumped because of the covid-19-related lockdown. Supply, which was already higher than needed, is currently excessive to say the least as Saudi, Russia and the US fight to win market share. The weakness is likely to persist for a while yet. Prices will only recover meaningfully if (1) demand recovers when coronavirus cases fall across the globe and the lockdown is lifted, and/or (2) the excessive supply is addressed. The latter can happen if US shale production slumps in response to collapsing prices, which is likely but will take time given the high level of existing inventories. So, I think WTI is very likely to test $20 and possibly fall below that psychological handle in the coming days or weeks. In any case, I don’t expect a speedy recovery until the above conditions improve.

Source: TradingView and TradingCandles.com

Author

Fawad Razaqzada

TradingCandles.com

Experience Fawad is an experienced analyst and economist having been involved in the financial markets since 2010 working for leading global FX, CFD and Spread Betting brokerages, most recently at FOREX.com and City Index.

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