What is happening to the oil market?

By 06/01/2021News
Morning Stock News

Gold  1944,09

EURUSD   1,2296

DJIA  30241,50

OIL.WTI  50,015

DAX   13705,18

The first 2 trading days of the new year have been extremely volatile for black gold. Take a close look at the chart below. On Monday we saw a strong reversal red candle, which first showed a new high for the last 10 months. And on Tuesday another reversal candlestick, but a green one, with an even longer daily range. So what happened in the market?




On Monday, two events collapsed the oil price at once. UK Prime Minister Boris Johnson announced the start of the third lockdown. In his statement he mentioned that the number of patients in the healthcare system is already 40% higher than the spring peak. At the same time, the rate of new hospital admissions is increasing. Mortality rates are also rising.
That would be all well and good. But we know that with some lag the situation could repeat itself in continental Europe and then in the US. This would be a huge blow to the already low demand for oil.
Talks that Russia and Saudi Arabia cannot agree on a cap on oil production in the new year have also added fuel to the fire. Against this backdrop, the oil price simply plummeted on Monday.


Tuesday, however, brought us new news. Apparently the OPEC+ countries have realised that the negotiations cannot drag on any longer behind the scenes. Otherwise the situation of spring last year might repeat itself, when even a sharp reduction in oil production could not stop the strongest fall in prices.
Representatives of Russia and Saudi Arabia reached an agreement under which the current limits on the volume of oil production for the first 2 months of this year are fully maintained. This was reported by the Wall Street Journal (WSJ), citing its own sources of information.
This decision is to be approved at the negotiations of OPEC+ countries on 5-6 January. At the same time according to the latest data, Russia will still be able to increase oil production by 65 thousand barrels per day.
On Wednesday, we are in for a very interesting day. A third reversal candlestick in a row is possible. On the back of profit taking after the OPEC+ agreement and the worsening situation with COVID-19.

14.00 German consumer price index for December
14.15 ADP private sector employment report for December in USA
20.00 US Federal Open Market Committee meeting minutes

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.