Oil prices have dropped substantially since the start of the coronavirus outbreak. And as the pandemic continues to spread, experts are pointing to the fact that there are likely to be more bitter days ahead.

Expert commodity strategists forecast that close to 15% of the world’s global oil consumption will be wiped out in April. And this prediction considers the fact that only some parts of the world have so far enforced a lockdown.

Should the rest of the world impose their own lockdowns, oil consumption for the month could drop as much as 25%.

And yet, the production of crude oil continues mostly unabated. Saudi Arabia and Russia are upping their production levels as the price wars between the two countries continue.

So far, the supply war between Saudi Arabia and Russia has exacerbated the crash seen in crude oil prices.

EUR/USD trading screens and trading price

OPEC and other key oil producers, at their last meeting did not reach a formal agreement regarding making deeper production cuts to help anchor the oil price.

President Trump has indicated he is hoping to help negotiations between Russia and Saudi Arabia. His intentions are clear as any form of agreement between the two countries will be positive for oil markets.

In the meantime, the price war between Russia and Saudi Arabia continues.

Crude oil tried to gather some momentum on Wednesday, April 1, but it was short lived.

Fundamentals

On March 31, prices of crude rose as a result of some preliminary discussions between President Trump and the Russian president. However, oil prices remain near an 18-year low. Things have not been this bad since November 2002, and the market might retest this region.

As at 00:50 GMT, Brent crude had risen by 19 cents, selling for $22.95 per barrel. 

Brent lost 61% in the first quarter, while WTI lost 66%.

Saudi Arabia has raised its production by 30%.

Technicals

Crude Oil Chart - WTI, M15 01/04/2020
WTI, M15 – 01/04/2020

The $20 level will be a crucial support level.

Should the break happen at this point, the next support will most likely be the $17.50 level. Also, should the bulls kick back in and push the market up, the $22.50 level would be the next resistance, and if it breaks this resistance, the next target would be the $25.00 level.

However, even if bullish price movements return, sellers are likely to come right back into the market. Hence, even if the market pushes hard to the upside, we should still expect a pullback.

Our Conclusion

Earlier today, President Trump denied what appeared to be an April fool’s prank on oil prices. The President expects that oil prices can drop to $9 per barrel. 

“That’s like from the 1950s, it really is — to think that it was $50, $60, $70, $80 — and now it’s $22, but you know, if you put a good bid in at $9, I think you could probably get what you wanted, right?”

Donald Trump

The last time something close to this happened was 22 years ago. In 1998, oil prices dropped to about $10 a barrel. It might indeed happen again.

Without a doubt, COVID-19 continues to impact stocks, oil, and our daily lives. Oil prices have fallen by over 60% since the outbreak of the virus.

We expect that in the long run, prices will continue to fall as Russia and Saudi Arabia seem likely to keep upping their production levels.