Blackout Weekend

Investors in the oil market had finally enough of the bullish run. Last Thursday, they started to sell-off their positions to get some cash for the weekend. Why? Due to the global lockdown measures, they have almost become insane and felt the need to get blackout drunk last weekend. It seems like this is the only reasonable coping method against the lockdown measures. According to the media, there is some truth to this fictional story. It is widely held that investors increasingly doubt that demand will recover quickly; especially, when looking at the strict measures applied in Germany, France, and elsewhere. Therefore, the oil demand is expected to decline further. As a reaction, the crude oil prices sharply dropped last week and helped defend these levels.

Most importantly for us was that both benchmark crudes fell under their first support lines, which lay at $67.68 and $63.81, respectively, for Brent and WTI. This was important for two reasons: first, it approved our primary scenario, which predicts lower prices for both crudes. Second, an alternative increase in prices has been neutralized from the scene. However, for the following developments, the crudes need to hold the new levels and further decline. The British Brent crude should fall below $62.36, while the mark for WTI is $57.27. Both crude oils still have some room on the lower end after crossing these second supporting marks, and we expect them to make a turnaround somewhere in that area. From there, we expect an extensive bullish movement! Overall, we expect prices of $80 and above. These could even become a reality as early as this year already! Initially, we aimed at the $60 mark, but apparently, the oil market took this as a joke, and it is needless to say that this mark was just crushed. In the bigger picture, we see Brent and WTI should reach above $120 in the coming years. Great news for all those who also see great potential in this market. Hence, the current bearish movement should be a welcomed one, as it enables excellent entries on the long side.

Brent Oil Technical Analysis

WTI Oil Technical Analysis

Overall, we expect the oil prices to decline in the short-run, which means that we should see Brent fall below $62.36 and WTI below $57.27 – this is our primary expectation. From there, both crudes have some room on the bottom before a more comprehensive upward movement should bring us above $80 in both Brent and WTI.