After a significant gap down from $45 to $35 in early March, it initially received solid support from another key level of $25 which had supported it well for several weeks, which was so desperately needed, so it was telling when its largest fall was breaking through the $25 level mid-April.
Generally in the last two months UK Oil had done well to consolidate above $25 after such significant falls in March. Throughout March UK Oil fell from a previous key level at $58 down to the multi-year lows and consolidated well stopping the rot, before the break lower in the second half of April. Generally UK Oil has not performed well this year falling from multi-month highs above $70 in the first week of the year down to its recent multi-year low as it has been struggling to receive any support from anywhere. This period has also been accompanied by a significant increase in volatility, which has now returned to previous levels. On its way down, UK Oil enjoyed some support from key levels along the way, for example, $63 however this was short lived and other key levels of $60 and $58 were also called upon to attempt to prop up prices, however both have failed.
Of note is that any of these levels are now likely to provide resistance if and when UK Oil rallies up from its lows, although with current price action considered, this would have to be some time off yet. The $58 level has played a significant role on several occasions therefore is likely to now offer some resistance should UK Oil attempt to rally further, although this is now some distance away. It has found reasonable support at the $63 level which again means this level may provide some resistance should UK Oil rally higher.
As the coronavirus pandemic rocked the world over the last three months, demand for oil seemingly disappeared, including a lack of air travel as businesses slowdown and people are simply not travelling by air, and combined with oversupply and a lack of storage. Countries all around the world instituted lockdowns and implemented travel bans to stem the spread of the virus, which brought the global economy to a halt. Over the last month, slowly but surely, governments have been easing restrictions allowing more movement which is increasing the demand for oil. It isn’t near pre-coronavirus levels, however it has moved from its deepest lows. Some countries are starting to report a ‘second wave’ of infections, most notably in the United States and South Korea, which is keeping a lid of oil prices for the time being. On the weekend, the World Health Organization reported a record rise in global cases, with the biggest gains from North and South America. Global Research from the Bank of America has raised its oil price forecast for this year and 2021 as demand recovers.
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