2019-11-11 • Updated
The oil market is unstable in the environment of trade wars, increasing US oil output, and other negative geopolitical factors.
On Friday oil plunged to the lowest level in more than two weeks. Such a plunge was caused by the escalation of trade wars tensions. Mr. Trump announced his willingness to impose extra $100,000 tariffs on the Chinese goods. Moreover, the increasing US output constantly weighs on the oil market endangering efforts of the OPEC countries and their allies. US energy companies added 11 oil rigs in the week to April 6. It was the biggest weekly addition in about two months. The total number became 808, the highest level since March 2015.
However, today crude oil managed to recover: WTI climbed above $63.30, Brent is trading at $68.50.
But traders should not rely on such figures. Risks still prevail in the market. Oil’s rise is not anticipated to continue for a long time. Trade wars tensions remain the biggest problem for the oil market. As soon as the trade wars will escalate, the oil benchmarks will decline. Moreover, despite the fact that OPEC and its allies declared a possibility to continue their oil output policy, the rising number of US oil inventories pull oil prices down.
Another negative factor that can put pressure on oil prices is Bahrain oil. On Sunday Bahrain announced a new discovery of at least 80 billion barrels of tight oil that is as much as Russia’s entire reserve. If Bahrain starts to sell its oil in such amount, OPEC and allies will not be able to stop the oil fall.
Hedge funds had already cut their WTI net-long position. Long positions declined by 7.4% because funds lost the largest number of bulls in almost a year, short positions increased the most since August.
Let’s look at the forecast.
Banks raised their forecasts for oil prices. According to 15 banks that were surveyed by The Wall Street Journal, the average price for Brent is at $63 a barrel, WTI is anticipated to trade at $59 a barrel this year.
For the next year, banks predict the fall of Brent to $61, before reaching $62 by 2020.
Making a conclusion, we can say that the oil prices will stay volatile until there is a swing between OPEC and allies’ output policy on the one side and trade tensions together with rising output in other countries on the other side. As the oil market is sensitive to news, it is worth to pay attention to it. It is a good chance to make a profit on the volatile market. But traders should be careful, such volatility can cause big losses as well.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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