After weeks of gains, the trend for oil has changed again. From a fundamental point of view, we have not seen huge changes, as there is no big news. The reality is that in this phase, markets are moving on emotions and gutfeel rather than rationality. This is generating disproportionate and impulsive movements, in both directions, illustrated by oil’s rally from $0 to $40 and subsequent fall of around 15% seen in the last few days. The rally was supported by generous expectations for a V-recovery of economies while the recent correction (which was also seen on stocks) is a normalization after the panic buying.
Technically, WTI futures are back to the levels seen in March when OPEC failed to agree on a deal. It will be interesting to see if this zone can support price in the next few days to generate a rebound or at least avoid a further decline as this would denote that we have found a new equilibrium for the price of WTI between $34-$35.
