empty
29.10.2020 02:20 AM
Oil #CL — bulls can't, bears don't want to

The second wave of COVID-19 again put oil prices at risk of decline. However, is there a danger that the dramatic events that took place in the oil market in the spring of 2020 will repeat and oil will collapse to the values of $20 and below? What will happen in the oil market if Joe Biden wins the US election? Let's try to figure it out in this article.

The second wave of coronavirus infection has covered the world economy, and the incidence rate in the developed world is now even higher than it was in the spring. With the sole exception of China whose restoration is proceeding at a fast pace. However, in other countries, the recovery is not so fast, since many industries, such as tourism or international air transport, have either virtually ceased to exist or the size of the business has significantly decreased during the pandemic era.

The epidemic has not yet been brought under control. However, measures to restrict and close the economy, which many governments have taken this spring, have not been applied now. Widespread blocking and compensation for business losses turned out to be too expensive. Accordingly, the impact of these measures on oil prices is now offset by more lenient quarantine conditions. Thanks to the OPEC+ agreement and the recovery of the global economy in the summer of 2020, oil prices have experienced growth, and commercial reserves in the United States have significantly decreased, although they still exceed their average volumes (Figure 1).

This image is no longer relevant

Figure 1: Commercial oil reserves in the United States

Even though in the past two years, China has started actively trading oil for the yuan, the price of black gold is still determined in US dollars and on US exchanges, and the behavior of traders in WTI futures contracts determines the dynamics of oil prices around the world.

If we consider the situation in the context of supply and demand on futures exchanges, Open Interest in futures contracts is currently at the lowest values since the summer of 2016 and amounts to 2.5 million contracts. At the peak of futures demand, in April 2020, the OI was equal to 3.3 million contracts, which together with the OPEC+ deal allowed the price to grow from a level close to zero to the current values.

Now the situation is qualitatively different. Paradoxically, speculators are the main driving force of the price. If speculators do not see prospects for growth, they will not put their money on it. At the same time, since the summer of this year, the total long positions of speculators on the WTI oil futures market, which has the #CL designation in Instaforex terminals, amount to about 350 thousand contracts. At the peak of demand in June, their value was 381 thousand, now the positions of speculators are 332 thousand. However, even for a deep decline in the oil price, the conditions on the futures market in the current situation are not enough. Speculators do not try to push oil down and reduce their sales, which means that they do not see any opportunities to reduce the price yet. Everything, of course, can be in our turbulent times, but oil prices look at the moment as if the bulls can't, and the bears don't want to.

This image is no longer relevant

Figure 2: medium-term technical picture of Light Sweet Crude Oil #CL

The daily time looks at the situation from the perspective of one month to one quarter, and oil traders should take this factor into account when making decisions. As shown in chart 2, starting from June, #CL oil quotes are clamped in the range of $ 35.50 - $ 44.50 with a width of 9 dollars. Since September, the range has narrowed to $ 4, which fully reflects the current uncertainty in the market. In this situation, the only strategy that can be used by traders in the stock signals trading system will be purchasing from bottom to top of the range and sales from the top end of the range to the lower limit.

Among other things, the range is a factor in reducing volatility, which can increase sharply when the price breaks out of the range. The middle of the range will continue to function as support or resistance, depending on which direction the momentum is directed. The difficulty is that being in the range, the price often makes false breakouts outside its borders. However, careful observation of false movements can provide a great opportunity for a trader to work in the opposite direction of a false breakout. Detecting and identifying false breakouts and traps requires special training and experience from the trader, so novice traders should refrain from using this trading strategy, which does not prevent them from carefully observing and studying it for further application.

With the US election just one week away, there is a perception in the markets that if Joe Biden wins the presidential race, it will be negative for oil. However, not everything is so simple. Biden does advocate limiting the use of hydraulic fracturing on federal lands, but if he wins, this will primarily put pressure on the American oil industry. According to some estimates, Biden's victory will cost 1 million barrels of reduced production in the United States, which is an undoubted positive for the oil market, since in this case, the US share will be received by oil companies from Russia and Saudi Arabia.

In conditions of high uncertainty, traders need to be extremely careful not to open positions with increased risks. On the contrary, the risks should be reduced, not increased. Be careful, follow the rules of money management.

Daniel Adler,
Analytical expert of InstaTrade
© 2007-2025

Recommended Stories

XAU/USD 分析與預測

黃金今日跌破3300美元水準。美國個人消費支出(PCE)數據符合預期。

Irina Yanina 17:37 2025-05-30 UTC+2

通脹幾乎已受到控制

儘管歐元對美元的匯率仍然保持堅挺,但歐洲中央銀行(ECB)管理委員會成員 Fabio Panetta 在接受訪問時表示,歐元區的通脹幾乎已經完全受控,但警告進一步的降息需要謹慎考慮決策。 此言論是在有關歐洲央行貨幣政策前景的討論日益增多之際發表的,表明監管機構對未來行動的謹慎態度。

Jakub Novak 13:40 2025-05-30 UTC+2

美元/加元。分析與預測

美元/加幣的匯率對今天正在嘗試重新獲得正面動能,不過在美國個人消費支出(PCE)物價指數這一關鍵數據公佈之前,交易者仍持謹慎態度。 作為美聯儲偏好的通脹指標,PCE報告可能會影響到市場對未來降息的預期,這或將提升對美元的需求,並為美元/加幣提供新的支撐。

Irina Yanina 13:22 2025-05-30 UTC+2

歐元/美元。分析與預測

歐元兌美元(EUR/USD)在早前反彈至1.1200水準後,持續掙扎於復甦階段,顯示出中等程度的負面偏向,然而這一跌勢仍然有限。美國經濟回調時期,美元正吸引買家,對歐元兌美元構成阻力。

Irina Yanina 13:19 2025-05-30 UTC+2

特朗普與公司之間的關於關稅的法律糾紛將對市場產生負面影響(比特幣和萊特幣價格可能持續下跌)

全球市場受到美國事件的顯著影響,無論是政治還是經濟領域,都像擺錘一樣持續搖擺不定。 本週早些時候,在美國國際貿易法庭同意受理由多家不滿嚴厲進口關稅的美國公司提出的訴訟後,市場迅速回應,對股票的需求增加,美元也隨之走強。

Pati Gani 11:11 2025-05-30 UTC+2

需要更多時間

達拉斯聯邦儲備銀行行長洛莉·洛根昨日表示,政策制定者可能需要一些時間來理解經濟將如何對關稅及其他政策變動做出反應,因此,他們在調整利率方面也將需要謹慎考量。 這位美聯儲核心領導人的聲明,凸顯了中央銀行面臨的不確定性日益增加。

Jakub Novak 10:53 2025-05-30 UTC+2

歐洲央行不應延遲降息

在本週出現相當大的調整後,歐元正在嘗試重回其月度高點。而多位經濟學家調查顯示,歐洲中央銀行預計會在近期內再度下調利率兩次,這比許多人預期的還要早得多。

Jakub Novak 10:49 2025-05-30 UTC+2

市場需求上訴

S&P 500 指數開盤強勢上漲,但收盤時卻轉為低迷。最初,該指數受到美國國際貿易法院裁定白宮關稅非法的提振,加上 NVIDIA 公佈樂觀的季度財報,開盤時跳空上漲。

Marek Petkovich 10:33 2025-05-30 UTC+2

5月30日需注意什麼?基礎事件初學者指南

將於週五發布多項宏觀經濟報告,但都不被視為特別重要。在德國,將發布5月份的通脹報告,預期指標將放緩至2%。

Paolo Greco 06:51 2025-05-30 UTC+2

英鎊/美元概覽 – 5月30日:正義已經伸張,但能維持多久?

英鎊/美元貨幣對在週四收盤於移動平均線下方,美元連續三天走強。然而,一切在當天下半場發生了變化。

Paolo Greco 03:51 2025-05-30 UTC+2
现在无法通话?
提出您的问题,用 在线帮助.
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaTrade anyway.

We are sorry for any inconvenience caused by this message.