Crude oil Price Volatility Spikes as OPEC+ Collapses, Will the 2016 Low Hold? -Guest Editorial

Alejandro Zambrano

Crude oil prices just experienced an epic slide as Saudi Arabia started a new price war with a big bang, making today’s crude oil price decline the sharpest one since the Gulf War in the early 1990s, says ATFX Chief Market Strategist Alejandro Zambrano

By Alejandro Zambrano, Chief Market Strategist at ATFX

Crude oil prices (Brent) just experienced an epic slide as Saudi Arabia started a new price war with a big bang, making today’s crude oil price decline the sharpest one since the Gulf War in the early 1990s.

The demand for crude oil has been declining as the Coronavirus triggered lockdowns of large parts of China, and now Italy, and the risks are still ahead of us with a grown number of cases in the rest of Europe and the USA.

To balance oil prices because of the lower anticipated demand of crude oil, Saudi Arabia pressed for OPEC and Russia to produce less crude oil to reduce about 4% of global supply. However, those conversations failed, and according to Saudi Arabia, Russia said that from April 1, “everyone can produce whatever they like.” Thus Saudi Arabia has pushed away by providing significant discounts to its clients and will increase production.
From next month Saudi Arabia will pump up more oil and also provide a six to eight dollar discount vs. the Brent Crude oil benchmark, hence the sharp drop in crude oil prices.

Read our Best Trading Ideas for 2020.

Brent Crude oil Price Technical Outlook

At the time of writing, crude oil prices were down by 22% on the day, and the price has still a price gap of 7.9% between today’s highest price and Friday’s close of $45.11.

The price was also trading near the 2016 low of $27.01, and far away from the latest high, the February high of $59.9.

The price’s far distance from the February-high and the closeness to the 2016-low places the risk-reward ratio in favor of the bulls. The gap in the price I also favoring the bulls.

This alone might not stop the slide in crude oil prices as stock market panic is also feeding into the crude oil price. However, traders that are aware of the risk-reward ratio will probably wait for prices to reach Friday’s close price, or trade near it before turning bearish. The downtrend will remain downwards below Friday’s high of $53.81, and we could have another try of the price to slide below the 2016 low.

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

Read this next

Digital Assets

Point72 invests $77.5 million in Bitcoin, Morgan Stanley holds $269.9 million

Point72, the $34 billion hedge fund owned by billionaire and New York Mets owner Steven Cohen, held $77.5 million in the Fidelity Wise Origin Bitcoin Fund (FBTC) at the end of the first quarter, according to a recent filing.

Digital Assets

Binance claims Nigerian officials sought $150 million bribe

A Nigerian court has ruled that Tigran Gambaryan, a Binance executive detained on charges of tax evasion and money laundering, can stand trial on behalf of the world’s largest cryptocurrency exchange.

Digital Assets

Kraken reviews Tether listing in Europe ahead of MiCA adoption

Cryptocurrency exchange Kraken is “actively reviewing” whether to delist the stablecoin Tether (USDT) from its European platform, according to a report by Bloomberg.


Discover How MoonBag Coin Presale Stacks Up Against Dogecoin & Litecoin

Discover how the MoonBag Coin presale compares to Dogecoin and Litecoin, with unique features, a robust presale structure, and new opportunities in 2024.

Fundamental Analysis, Market News, Tech and Fundamental

Global FX Market Summary: Federal Reserve Policy, USD, May 17 ,2024

Overall, both the Federal Reserve’s policy and the US dollar’s outlook are shrouded in some degree of uncertainty.

Market News, Tech and Fundamental, Technical Analysis

Ethereum Technical Analysis Report 17 May, 2024

Ethereum cryptocurrency can be expected to rise further toward the next resistance level 3200.00, which is the top of the previous impulse wave i.

Digital Assets

Hong Kong adopts digital yuan payments through Chinese banks

Hong Kong has launched a pilot program enabling digital yuan payments through major Chinese banks, marking the first instance of China’s digital currency project being deployed outside the mainland.

Retail FX

Saxo Bank increases client assets five-fold to $116 billion

Copenhagen-based broker Saxo Bank has achieved a major milestone, surpassing $116 billion (DKK 800 billion) in client assets.

Inside View

ISDA says US Basel III “endgame” to heighten market risk capital

ISDA further explained that, by requiring banks to hold additional capital that is misaligned with levels of risk, the proposal would significantly reduce capital market access for US end users and businesses, restrict the ability of businesses to hedge exposures to changes in commodity prices, and increase the cost of everyday consumer goods, including food and gasoline.