Oil bottom may be in place

The last time Brent fell below $50 a barrel was in July 2017.  As the markets continue to sell risk assets and while the fundamentals have been terrible for oil, the move lower may be overdone.  Oil is now lower by 40% from the 4-year high in October and after the Christmas Eve crash, we could see a key bottom in place.

The backdrop for lower oil prices remains slower growth and surging US supply will lead to a surplus.  Overnight, Russian Energy Minister Novak reiterated the OPEC and allies viewpoint that they see a more stable oil market in H1.  He noted that OPEC+ planned meeting will take place in April, but the agreement allows to meet at any moment if a quick response is needed.  Expectations are growing for OPEC to convene an extraordinary meeting if we see another major wave of selling.  Another $5 to $10 lower with oil prices would start making Russia and US shale producers uncomfortable.

The Canadian dollar  is also attempting to rebound here and could have its first consecutive days of strength against the greenback since December 12th.

Price action on the Brent crude daily chart shows that price is tentatively forming a bullish ABCD pattern.  If valid, we could see a rebound towards the $55.00 level.  Key resistance may come from the $57.50 level.  If the pattern is invalidated, initial support may come from the $47.50 level.  Major support would lie at the $45.00 level.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya