USOIL futures have racked up losses of over 8% in posting a new 21-year low at $18.05. The divergence in oil prices with global stock markets, which have rallied after US President Trump said that US states will take a phased approach to reopening the economy, is notable. Prime Minister Trudeau said yesterday that they are “many weeks away” from being able to open the economy. He assured that the G7 is committed to doing whatever it takes on COVID-19.
But oil markets haven’t felt the good vibes, with sentiment remaining preoccupied by the massive demand/supply imbalance. US inventory data this week showed a record rise in stocks, surpassing the previous record build that was seen in the prior week, while the IEA said that oil demand has hit a 25-year low and that there is “no feasible agreement (among oil producing nations) that could cut supply by enough to offset such near-term demand losses.”
That said, it seems that the return to economic normalcy is likely to be a long road. At the same time, USDCAD has rebounded out of a 2-day low at 1.4003, with the pair reaching levels around 1.4110, following USOIL’s decline. The overall outlook for Oil remains strongly bearish, while USDCAD based on Oil is seen to positive. Oil is not expected to reverse unless we see the Energy market into balance for a reasonable time. Next real support could be found for USOIL back in the lows seen in 2000.
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Andria Pichidi
Market Analyst
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