The oil price is currently at its lowest point of 18th of March. It has even fallen slightly below this level. Now it is getting dangerous! Only on Friday we had the headline “Gradually descending to new lows?” And now after the weekend it looks like it! While the oil price (WTI) was a few cents above the USD 20 mark at its low on 18th of March, the low this morning was USD 19.91. At 20.16 Dollars, we are currently a little bit higher, but the situation is now extremely dangerous. It can be dramatic.
Oil price at extremely important mark
This $20 mark is a big round sum. That’s not the only reason it’s important. As we said, it was also the latest low. But underneath it there is only a black hole. To express the drama of the situation a little more clearly! We have now reached the lowest levels since 2001. If the price of oil falls a little more significantly below the $20 mark, it is possible that stop loss orders could be activated to limit losses, which in turn could trigger an avalanche of sales. Yes, it can go much further down. This is all the more dramatic when you consider that the WTI oil price was still trading at 65 Dollars in January.
The current situation
On the one hand, the Saudis’ oil war has shocked the market. They flooded the markets. At the moment, there are no signs that they will stop their flood of supplies, which now seems to be starting in very concrete terms. Saudi Arabia says according to recent reports that they are not currently in talks with Russia to balance the market. On the other hand, we have the demand shock caused by the corona virus. Nothing seems to be able to stop the pulverization of oil demand at the moment. Or does OPEC want to halve its production volume for now, in order to have any influence at all on the price of oil?
There are opinions that the demand for oil by the coronavirus is collapsing worldwide by 15-20 million barrels per day. This is a good 20 percent less than last year. Energy Intelligence sees the decline at 10 million barrels per day. That too is dramatic. And apparently fracking companies in the USA are currently being asked to produce less oil because the operators of storage facilities seem to have no more free capacity. The decline in demand seems so great at the moment that a lot, a very lot of oil is being pumped into the depots. But the depots are now reaching their maximum utilisation limits. These are not good prospects for the oil price. If it can’t hold the 20 Dollar mark, will there be a quick slide down? It is possible, but of course we don’t know. Make up your own mind!