Crude Oil Price Analysis for Rest of 2020 | Start of an Oil Glut Era?

by birtanpublished on October 2, 2020

it's been quite the year for oil um
traded as high as uh
65 in january then crashing down this is
the cash price
uh down to almost 10 uh 21st of april
this year and we're back up to 38
dollars um so massive swings
but what could the rest of 2020 have in
store we'll take a longer look at the
oil price in this video
we all know the volatility uh that the
market's been through this year because
of the spread
of the coronavirus and and the impact
it's had on um
demand for oil uh globally uh we do our
regular updates
on oil shorter term updates but i
thought well let's um maybe take a step
back
look at the bigger picture over the next
three months or so
and see where we can expect oil to be
trading at the end
of 2020. it had been perhaps a little
dull
um during the summer but we did see the
price uh
has come under pressure this month so
far it ended
uh august around 43 dollars a barrel
and it has traded as low as uh what 36
and a half dollars we've seen a decent
sell-off
in the first couple of weeks of uh
september but i'm wondering
is the opportunity now to be a buyer
into the year-end we've got a couple of
existing trades running let's take a
look
so we actually have two opposing trades
running on oil which is not a strategy
i'd normally recommend but we did a
shorter term one and a longer term one
so we did end up
buying brent oil 110 barrels of 42
on the 8th of september and then we have
this longer term
short running from the 24th of august
short 113 barrels
of u.s crude west texas crude from 42.66
that's showing
a decent profit about twice the risk on
that i think both of these trades need
adjusting
so we'll come back to them in the second
part of the video and see if there's a
new opportunity
hello i'm david jones from capital.com
and i thought we'd uh continue the theme
this week
of taking a longer-term look at markets
and this time um
i thought we'd have a look at crude oil
to the end of the year to see what we
can expect from where it's trading now
uh further recovery
falling off a cliff again or not much
change at all as usual uh if you're
watching this
and you haven't subscribed if you could
uh click on subscribe it helps support
the channel
and it means we can continue to push out
uh four videos
every week on the various markets that
we cover but um let's catch up
with um what's happened so far for crude
oil and what the rest of the year could
have in store
so in early january uh the price of
crude oil was strong we saw the cash
price of west texas crude
trade as high as uh 65 a barrel
in january and of course uh by april
that price
had crashed down um because of the
spread of the coronavirus pandemic the
cash price
was trading around about ten dollars a
barrel and famously
in april the may contract went negative
uh trading at about minus 37 dollars a
barrel because of oversupply
lack of demand and problems uh in
storing all so it's been a real volatile
year as we know
for the price of oil but since then we
have had a recovery we had
seen the price more than quadruple off
that april low the west texas
cash price has come off a little bit
since then but at the time
recording still trading around 37 38
a barrel we've heard from opec uh this
week uh
the oil producing nations and they
they've come out and they're revised
uh down perhaps not surprisingly uh
global demand for oil
in 2020 by 400 000 barrels a day uh
compared to last year
so this means that actually if it ends
up coming true that forecast then we'll
see
global consumption in 2020 because of
the pandemic
down by about 9 million barrels compared
to what we saw
in 2019 and opec did say that they still
think
the economic risks because of the
pandemic are still
uh to the downside so they are
suggesting that perhaps we're not quite
out of the woods yet
when it comes to the price of oil and
they reinforced this by saying
um that it's not all going to magically
disappear these problems by the end of
2020 they think the pandemic
will continue to weigh on demand for oil
into the first half of 2021.
so clearly towards the end of the year
we still have uncertainty
around the price of oil we've seen a
rise of cases uh in
in continental europe here in the uk of
course
in recent weeks we're we're seeing some
countries putting
restrictions back in place not full
lockdowns
like we had but there is still concern
about the economic impact for that so we
have
uncertainty over the next few months
still for the price of oil
and add into the mix the u.s
presidential uh election you know at the
moment it looks like
we could get a a change in president
uh in the usa but that the polls have
been wrong
before and it's what does uh the new or
the existing administration's all policy
look like after that election so plenty
of uncertainty swirling around
the price of all at the moment we're
going to jump back onto the charts in a
second and come up with some trading
ideas let's talk about the big levels to
watch first
i think the first big hurdle um is the
highest hit
in this recovery so just shy of 44 a
barrel up at 43.60
on the downside i think a key level for
short and medium-term traders to watch
it's that that most recent low then
after that we have lows down
towards 30 dollars a barrel but let's
put some color on these numbers let's
jump back on the chart and take a look
at things in more detail
let's take a look at things in a bit
more detail then i don't normally use
moving averages but i've got a 200-day
moving average uh on the chart of oil
here and i just thought well let's have
a look where is the price of oil
compared to the average price over the
last couple of hundred days
and how has it performed in the past you
know there have been times clearly if we
go back to
uh late 2018 early 2019 where the price
of oil
moves a long way away from the 200-day
moving average then moves back to it and
trades pretty much sideways for a bit
we've seen um you know a similar extreme
move away from the 200-day moving
average
and actually where we are now price of
all at the moment
is pretty much um bang on where it's
traded
for the last couple of hundred days of
the 200 day average
uh i should say it wouldn't surprise me
given the uncertainty i just talked
about
that if we saw further sideways trading
for all and when we look at it at the
end of the year
it's about 40 44 about
that sort of area but of course there is
the opportunity for shocks along the way
but what i want to do is um put a trade
on
here that may end up being short-term
depending if i get it wrong or not um
but perhaps is a good entry point
for a drift higher into the end of the
year although i'm not
expecting much in the way of drama and
pushing through fifty dollars
fifty dollars a barrel anything like
that i think it is interesting down here
let's flip this over
to a shorter term chart so we've got our
hourly chart here and because the
volatility
was relatively low late june july and
august um
the move we've had in september you know
does look quite extreme
pulled back to its worst levels since
uh the middle of june back then we had
good support ahead of
sort of 34 dollars a barrel so what i'm
tempted to do here
is to think about being a buyer um with
perhaps a stop the other side of 34
see if we can run this trade into the
end of the year but i do have
an existing trade running already so i
need to to manage that let's just zoom
in on what's been going on in september
so so far it's struggled with um getting
through
39 after this sell-off we we've seen it
try
uh to build a recovery it's it hasn't
been sustainable
so far in the very short term it is
overbought on the rsi so perhaps we get
a bit more weakness
but i'd quite like to be a buyer if it
breaks through 39. so what i might do is
have an order resting
at 39.50 and buying if it breaks through
there with a stop the other side of 34.
so if we look on the daily chart um you
know it has reached an extreme this is
the most extreme it's been on the rsi
we've got to go back
uh to march levels really to see an rsi
this extreme it doesn't mean it can't go
any lower but let's just
adjust that existing trade and set up
the new trade so here's my crude oil
trade down here at the bottom so we went
short of 42.66
the stop has moved to 42.50 so locking
in a bit of profit
i'm going to move that stop to 39 so
i've moved uh the stop on that to 39 so
i'm going to close the trade
if the price of all rallies uh to 39
it's currently just above 38 dollars a
barrel so that takes care
of my existing trade i've got the brent
crew trade running i'm happy with that
for now let's go back to the chart
and what i want to do if if the move in
the first couple of weeks of september
has been an extreme move for royal
let me go back to perhaps more boring
trading but it moves back
up to those highs sort of ahead of 44. i
want to be in on that move
so i'm going to put an order in to buy
at 39.50
an aggressive place for a stop would be
the other side of these lows these sort
of 3640
lows but i'm going to go a bit further
out than that i'm going to put the stop
um at those june lows down at 34. um
let's let's set that trade up and this
is a trade
really to try and run any strength into
the end of the year
so i'm going to buy 60 barrels if the
price gets to 39.50
if it gets to 39.50 put a stop at 34.
it's pretty wide stop
um i think you could have a tighter one
as i said it is warning me that these
are opposite positions
because i'm currently short oil um so
thanks for the warning
um and i'm going to place that order in
so it just sits in the market
so like i say i think we could see
something of a boring
end to the year uh for crude oil famous
last words
there is a lot of uncertainty around
this market perhaps we just see
range trading but i think at the moment
the move we've seen so far
in september could be something of an
extreme assuming these old 34
lows hold um it wouldn't surprise me to
see it have another look at those highs
from august i think if we start to lose
34
then um clearly i'm wrong and we need to
start targeting
and move back to uh sort of mellows just
ahead of 30. so i'm
fairly quiet over the last week or so
and i just think that perhaps we'll see
it
try and claw its way higher over the
next few weeks
so it wouldn't surprise me to see choppy
and ultimately directionless trading
for the end of the year for royal we'll
keep you updated of course with our
regular updates
throughout the month but for this longer
term look that's it from me davidjones
and capital.com
good luck with your trading
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