Even the best Hollywood movie director would have struggled to imagine the last few days for oil. The dramatic scenario seen last week, with WTI falling below $20 has been followed by a spectacular rebound of 50% in just two trading sessions. This happened when markets realized that the lower price, in conjunction with coronavirus, was becoming a huge problem for the US as well. Donald Trump’s tweet was seen by markets as an admission of sorts, making clear the US’ intention to try and achieve a higher price. It now faces the most difficult part as it is very complicated to find an equilibrium between cuts that are strong enough to have the necessary impact yet not too stringent so that other members of the alliance do actually adhere to them.
Technically, we have seen a jump from the bottom of $19.50 up to $29, followed by a drop at the start of the new week to see oil trading at $26. Given the price movement of the last few hours, it is clear that investors are still believing that some agreement will be reached, despite the unclear scenario. This helped the price to rebound to $27.5, while the situation remains strongly volatile as even a deal being agreed won’t sort out all the problems oil faces.
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