Oil is up by 7% today after the dramatic meltdown yesterday
Oil may be keeping above $30 but there isn’t proving to be a material change in the fundamental and technical outlook to suggest a stronger recovery in the price action today.
Despite bouncing by over 7% from the close yesterday near $30, oil is not really going places as the upside momentum is struggling to even get close to testing the overnight high @ $34.88. Price action is largely wandering around $32 to $33 levels for now.
Meanwhile, sellers are still lacking fresh conviction to drive a move lower under $30 but they also first have to break a minor trendline support established by buyers.
The fundamental outlook hasn’t changed whatsoever as the oil market looks set to encounter a massive supply glut on Russia and Saudi Arabia fighting while the global economy continues to be gripped by the coronavirus outbreak.
Add to the fact that sustained weakness in oil prices will weigh on smaller oil firms and cause more damage to risk sentiment, it is a bit of a feedback loop that will keep the pressure on oil to move lower as the market turns more sour.
In the bigger picture:
There is little to suggest a major turnaround for oil from a technical perspective either. As such, the bounce today looks more like a ‘dead cat bounce’ for now rather than a solid platform for buyers to build upon in the days/weeks ahead.