Market Overview

20 May 2020

Crude Prices Wither on Fears of Pandemic Second Wave

The rise of crude prices in the beginning of this week was fueled by the global ease of the pandemic and hopes for a gradual economic recovery, as well as increasing demand for crude. The optimistic signals of increasing business activity embolden by US Federal Reserve's (Fed) Chair Jerome Powell who waved an expectation of economic recovery in the second half of 2020, helped oil prices.

China shows rising demand for crude after reopening the economy in April. The crude refining in China was up by 11% in April compared to March, and even 0.8% above April 2019 levels.

International Energy Agency (IEA) forecast the overall demand for 2020 could fall by 8.6 million bpd. It is far better than the previously expected level of 9.3 million bpd. World reserves will decrease by 5.5 bpd by the end of 2020 and the global supply of oil will decline by 12 million bpd in May, according to IEA estimates. The oil glut that was estimated at 25 million bpd in April has now reduced by 17 million bpd.

However, the rise of oil prices has withered as they approached a strong technical level of $36.4 per barrel on the Brent crude benchmark. The existing drivers seem not be enough to break through this resistance. The major reason for this are fears of a new second wave of the novel coronavirus spread as reports over new virus outbreaks in some Chinese provinces emerge. According to a Deutsche Bank survey of 450 experts worldwide, 55% of them expect the second wave of infection. Only 15% think the opposite.

Other events affecting prices are the trade wars against China on the background of accusations from the US of covering up important information about the origin or spread of the COVID-19 infection by China. All these negative factors retracted Brent crude prices back to $35 per barrel.

The composition of all these factors will be sketching crude price dynamics in the short term. It the Brent price will fail to break through the resistance of $36.4 it may drop to $30-31 per barrel. Breaking through April highs may steer Brent crude prices to $36.5-$39.7 area.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
37 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.55% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2020 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. You may change your cookie consent or view our cookie declaration here.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.55% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.