Jump to content

Crude oil prices may fall further after Saudi price cut

Recommended Posts

Oil prices continue to fall as economic woes pressure narrative; Saudi Arabia’s state-owned Aramco slashes its June prices and WTI crude prices break below key support above the key 100 level.

Source: Bloomberg

WTI crude oil prices look set to drop further in Asia-Pacific trading following a big overnight plunge. A report from Bloomberg suggesting that the European Union is softening its stance on a proposed ban on Russian oil appeared to drive most of the selling. Objections from Hungary were the main factor holding the bloc back from banning Russian oil outright.

Viktor Orban, Hungary’s Prime Minister, has cited security concerns over the ban, which has been in the works for weeks after Germany capitulated its stance last month. Hungary remains highly reliant on Russian energy products. The EU offered Hungary and Slovakia an exemption previously, but Mr. Orban has stated that his country would need a five-year exemption along with funds to transform Hungary’s infrastructure. The oil market will likely await further news on the next sanction package after the setback.

Meanwhile, broader economic concerns between surging inflation and China’s economic slowdown amid its Covid lockdowns are underpinning worries over the state of the global economy. Central banks are making aggressive shifts to combat prices, aiming to fight high expectations from becoming anchored in the economy, which would only work to further inflame high inflation. Shanghai officials expanded curbs across the city this week even as case numbers drop.

Saudi Arabia’s state-run Saudi Aramco announced it would reduce oil prices for June. The move will bring the premium paid by Asian buyers from over $9 per barrel to $4.40 per barrel. The premium paid for most buyers across Europe would also be reduced next month. The move signals that the major OPEC producer sees demand trailing off, likely induced by the bout of lockdowns across China due to Covid outbreaks. A larger pullback is unlikely given the uncertainty around China’s Covid situation as well as the ongoing conflict in Ukraine.

WTI crude oil technical forecast

Prices pushed below a major trendline and the 50-day Simple Moving Average (SMA), representing a break below confluent support that has helped underpin oil since December 2021. The 100 psychological level is now eyed as the most immediate area for potential support. A drop below that would bring the 100-day SMA into focus, currently at the 95 mark.

WTI crude oil daily chart

Source: TradingView

Thomas Westwater | Analyst, DailyFX, New York City
10 May 2022
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 27/03/23 15:37
  • Posts

    • Look Ahead to 28/3/23: Australia retail sales; Ocado, Walgreens Boots Alliance, Micron results Earnings take centre stage on Tuesday with results from Micron Technologies, Walgreens Boots Alliance, Ocado, and Bellway. Watch AUD/USD ahead of Australian retail sales data. Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 27 March 2023              
    • #EURUSD: Peculiar PatternI spotted a cup & handle pattern on ⚠️EURUSD on 1H time frame.1.0777 - 1.0783 is its neckline.If the price breaks and closes above that, I will expect a bullish movement.Goals will be 1.0843 / 1.0894If the price sets a new low, the pattern will become invalid.
    • Joshua, where next with this trade, have you closed your position following the continued slide since 13th March?
  • Create New...