It has spent the best part of the last two months trading below this level after falling sharply through it from a six month high above $46. UK Oil reached the six month high after very slowly but steadily moving higher in a period of very low volatility, although the volatility has return in the last month. After it broke through $43, it was able to enjoy some strong support from this level, however this has now been strongly broken through and is providing some resistance as expected.
In early June UK Oil made two solid runs towards a then three month high and met stiff resistance at $43 on both occasions. Throughout May, UK Oil slowly but surely moved higher to that three month high, before falling sharply, and then making repeated attempts to push passed the current resistance around $43. Its recent surge higher is a vastly different picture to mid-April, as UK Oil sank to its lowest level in many years below $20, and currently UK Oil is close to closing the significant gap down in early March, by returning to above $45.
In early May, UK Oil settled right around the key $30 level after rallying well off the multi-year lows below $16, and it also consolidated well several weeks ago around $35. 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. Through most of March and April, UK Oil did well to consolidate above $25 after such significant falls in early March. During the first half of 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.
Risk appetite has been boosted in financial markets around the world, after Pfizer announced promising results for its COVID-19 vaccine, which saw oil surged higher in one of its biggest moves in six months. Pfizer stated its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data from a large study, which has brought global oil demand to a halt. Financial markets saw significant jumps in volatility including oil. OPEC+, which includes Organization of the Petroleum Exporting Countries (OPEC) states, Russia and others, is currently cutting 7.7 million barrels per day (bpd) and is currently considering reducing those cuts to 5.7 million bpd from January 2021. This would lead to reduced supply and potentially higher prices. Having Joe Biden as the U.S. President increases the likelihood of Iranian oil supply returning to the market, as he will possibly relax measures on Iran and Venezuela, and this will lead to an increase in oil production. However Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said the OPEC+ deal on oil output cuts could be adjusted if there was an agreement, increasing the prospect of tighter supplies and higher oil prices.
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.