A Huge Drop in Oil Prices: What’s Happening?
- Oil prices reached the 17 USD mark… Not reached since 2001
- COVID-19 one of the main factors that affected the Oil industry
- OPEC+ failed to halt the depreciation of oil prices despite production cuts
Monthly Time Frame:
Since the beginning of 2020, Oil has been experiencing sell pressure by investors.
The price dropped from 65 to nearly 18 Dollars a barrel.
Oil broke out, as shown by the white trend line, towards the end of February before rallying downward towards the 33.80 mark, highlighted by the red horizontal line.
It incurred another drop after breaking the 33.80 level acting as a support to reach the price of 18 dollars a barrel.
4-Hr Time Frame:
On the 4-hour time frame, the bears were successful in pushing the price below the support level (19.24 USD).
Another level that is significant when looking at Oil prices is the 17.05 mark. Oil will likely continue its direction downward towards this level since there is no other sign that the price will reverse soon unless the price manages to close above the 19.24 mark again.
When adding the CXY (Canadian Dollar Index) to the Crude oil chart, a positive correlation can is seen between these two assets.
This correlation aids to speculative ideas by analyzing which instrument follows the other.
Since Canada has the third-largest oil reserve, and it is the fourth-largest oil producer, the Canadian dollar is affected by the depreciation of oil prices.
Prime minister Justin Trudeau stated on Friday that his government is going to invest around 2.5 Billion Canadian Dollar in assisting the oil and gas industry that was hard hit by the coronavirus crisis.
China GDP’s dropped 6% amid this virus, the lowest since 1992.
In February, the country reduced its consumption by 3 million barrels a day or 20% of its total consumption due to the pandemic.
It seems a cut in oil production implemented by OPEC+ was not enough to stop the considerable drop of the oil prices.
Russia and Saudi Arabia and other members of OPEC+ agreed on a cut of 10 million barrels daily after noticing an oversupply in the market.
Investors still have a bearish sentiment towards Oil since most of the countries are in lockdown, which led to a massive decrease in demand for Oil.
After reaching its lowest low since 2001, could the price of Oil spike upward next week?