UK Oil At Support After Strong Correction Down
- UK Oil started its rally since the start of February on the back of the demand recovery story from Covid-19 demand destruction from lower industrial runs and vehicle use.
- This increase was accelerated when the US faced a cold snap which extended to the Gulf coast which saw US crude production affected, causing a global shortage of crude oil.
- The market cooled off when traders started thinking OPEC will loosen their production cuts given oil prices have reverted to pre-covid levels. However OPEC’s decision to maintain cuts came as a surprise and sent markets higher. Point to note is that this is in nominal terms – USD has depreciated and hence one has to adjust for this when considering historicals.
- Most recently, oil saw a $5 fall, a biggest move in recent months, which seems to be due to less than expected recovery figures as well as a lackluster Chinese demand for crude oil.
- Market has retraced to a prior support level and saw some rebound on Friday when news of Saudi being attacked was released. It could be said the effects of this attack have been priced in and given no other change in fundamentals the market may be poised to drift lower.
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