Crude prices have posted sharp losses at the start of the week. Currently, U.S. crude oil is trading at $29.29, down $3.58 or 10.90% on the day. Brent crude oil is trading at $30.02, down $4.68 or 13.48%.
Crude Slides as Market Turmoil Continues
It was another dismal week for crude, which plunged 20.8 percent. Crude has greeted traders with more double-digit losses on Monday, with prices falling below the $30 level, which has psychological significance.
Oil prices are in free-fall, after being hit by a ‘triple whammy.’ First, panicky investors are gripped by a ‘dash for cash’ attitude which has boosted the U.S. dollar, while all asset classes have headed lower, including crude.
Second, with economies around the world buckling under the COV-19 crisis, the demand for crude continues to drop. China, the world’s second-largest consumer of oil after the U.S., has seen demand for crude shrink by more 20 percent. According to Pearce Hammond, an analyst at Simmons Energy, “the demand drop unfolding is like nothing anyone has ever witnessed”.
Third, the price war between Russia and Saudi Arabia continues. The 3-year old agreement between OPEC and Russia fell apart earlier in March, when Russia refused to deep cuts which OPEC wanted to implement in order to stabilize prices. Saudi Arabia responded by raising output and lowering prices, which has resulted in a huge oversupply of crude on the global markets. With no end in sight to any of these three factors, traders can expect oil prices to remain under heavy downward pressure.
The line of 29.85 remains fluid. Currently, it is an immediate resistance line. This is followed by resistance at 32.80. On the downside, there is support at 28.20, protecting the round number of 28.00. This is followed by support at 26.80.
This article was originally posted on FX Empire
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