Good day and welcome back to another article from AspireFX. Over the course of the last month, USOIL has rebounded from below $0 a barrel and is now trading above the $30 mark. From a statistical stand point, this is nearly a 50% recovery since the beginning of 2020, where USOIL was $65 per barrel.
It seems as though the recovery may happen sooner than expected due to OPEC countries successfully adhering to the supply rate cuts as well as many European countries have begun easing their lockdown measures and gradually allowing economies to return back to normal.
Looking at the weekly timeframe we can see the huge rejection off of $0 leaving us with a doji as well as a beautifully printed 3 pin pattern signifying the bulls are back in control of the market. Expect bulls to drive the price upwards over the coming weeks, as long as countries continue to ease lockdown restrictions and OPEC members continue to meet production cuts. The $50 mark is a major level which sits nicely on the 78,6 Fibonacci level.
The $50 region has proved to be an important region of support and resistance which could prove to be a significant area where we could break through or reverse off of depending on how the second wave of the coronavirus affects the global economic activity and how OPEC members react to this as well.
The daily timeframe offers a clearer look at how the bulls have reacted since we found support around $10. Price has been climbing steadily, we have consolidated around $25 and went on to create fresh highs. The uncertainty in the market at that point of consolidation can be narrowed down to low demand levels as strict lockdown restrictions throttled economic activity as well as not all OPEC players weren’t willing to meet the production cuts in time, leading to a surplus in inventories. Trump also lit a new spark between US and Iran leading to a standstill in the market in anticipation of the next move.
Although price has been moving slowly over the last few days, we did have a big rejection at $30.70 which confirms the bulls are still in control of the market. With most OPEC members now meeting production cuts quicker than anticipated, globally there has been production cuts rising to nearly 15 million barrels per day, it is looking likely that oil will continue to stabilize.
The 1H timeframe shows clearly how we’ve been ranging between the $30-$35 price range. As more countries around the world begin to lower lockdown restrictions and economic activity begins to return to normal, oil will also continue to stabilize. This week, Thursday, we had the US Crude Oil inventories data release coming in at 7.9 M which is negative as the expected was -2.5M . This has allowed the recent decline from the highs as seen above.,
All signs are pointing to a V shaped recovery but it may not be as simple as that especially in trying times like these. As mentioned before countries lifting lockdown restrictions as well as OPEC members continuing to meet production cuts will see the oil market move towards pre-virus price regions, but the second wave of the coronavirus will be a major factor to consider. As always, trade safe and have a great week further. Subscribe to our blogs for direct access from your email.