The recent capitulation in the oil market has come due to a number of conspiring factors. Firstly, the breakdown in OPEC talks with Russia reluctant to agree to the 1.5mln bpd production cuts. Secondly, the effective declaration of ‘oil war’ with maximum production planned for April 01 by Saudi Arabia. Thirdly, the falling oil demand as coronavirus spreads. These three factors, alongside existing oversupply, have created a perfect environment for oil sellers.
Mind the gap, please
There remains a gap from the shock news over the weekend from Saudi Arabia’s price war that is still to be filled. If you take a look at the chart below you can see the large gap on the chart.
Expect sellers from the $39 and $40 region if we move back into that region. The main picture for oil remains bearish, so expect this region as a sensible place for sellers to re-join the downtrend.