Oil's winning streak has given traders and investors alike a glimmer of hope. West Texas Intermediate and Brent Crude, the United States, and International proxy for oil prices have been ranging around $25.20 and $31, respectively. Furthermore, it was just a week ago when oil prices were on a losing streak, were prices dropped as low as $10.07 for WTI and $19.99 for Brent. Today’s price represents 150% and 50% gain off last week's prices.
There have been plenty of factors against the commodity such as the Coronavirus shattering short term demand for refined crude, Saudi Arabia, and Russia's price war alongside negative prices which caused devastating losses for retail investors in securities such as United States Oil Fund (USO). Alas, the oil market has endured once of the bloodiest months on record. Retail investors and traders are clinging on to any positive news and forecasts on the shattered commodity.
There have been tentative signs that the stabilization of oil is near the horizon. Firstly, inventory buildup at Cushing, Oklahoma, is slowing down and the oil supply cuts from numerous countries are taking effect, alongside demand slowly picking up as many countries come out of lockdown. Magnus Nysveen told Bloomberg that “The market is still vulnerable, but now one thing is clear, the demand bottom is behind us, and this is manifesting in oil prices which are on the rise.” Furthermore, analysts at RBC Capital Markets pointed out that congestion data in the US conveyed vehicle traffic had rebounded off their lows.
However, it’s not all rainbows and roses for oil. Even with the cuts, market supply still outpaces demand. And even though inventory buildup is slowing down, there is still buildup occurring. Furthermore, a second wave of the Coronavirus is not out of the question. The market’s attention will be at EIA’s Cushing Crude Oil Stocks announcement tomorrow, forecasted at 2.95m barrels.
Anish Lal has some excellent technical commentary on Oil's winning streak and its future price. You can watch the video here.
Is it time to start looking at oil?